BANKING AWARENESS
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Banking history of India is divided into Two major categories -
1. Pre-Independence Banking History
2. Post-Independence Banking History
Pre-Independence Banking :-
*.The origin of modern Banking in India dates back to the 18th century. *.Bank of Hindusthan was established in 1770 and i t was the first bank at Calcutta under European
management.
*.Banking Concept in India was brought by Europeans. *.In 1786 General Bank of India was set up. *.On June 2, 1806 the Bank of Calcutta established in Calcutta. It was the first Presidency Bank during
the BritishRaj.
*.Bank of Calcutta was established mainly to fund General Wellesley’s wars against TipuSultan and the
Marathas.
*.On January 2, 1809 the Bank of Calcutta renamed as the Bank of Bengal. *.In 1839, there was a fruitless effort by Indian merchants to establish a Bank cal led Union Bank but i t
failed within a decade.
*.On 15th April , 1840 the second presidency Bank was established in Bombay – Bank of Bombay.
*.On 1 July 1843 the Bank of Madras was established in Madras, now Chennai . It was the third
Presidency Bank during the BritishRaj.
*.Allahabad Bank which was established in 1865 and working even today. *.The oldest Public Sector Bank in India having branches all over India and serving the customers for the
last 145 years is Allahabad Bank. Allahabad bank is also known as one of India’s Oldest Joint Stock
Bank.
*.These Presidency banks worked as quasi central banks in India for many years under British Rule. *.The Comptoire d’Escompte de Paris opened a branch in Calcutta in 1860.
HSBC established itself in Bengal in 1869
*.Calcutta was the most active trading port in India, mainly due to the trade of the British Empire, and so
became a banking center.
*.The Oldest Joint Stock bank of India was Bank of Upper India established in 1863 but this bank was
become defunct in 1913.
*.In 1881, Oudh Commercial Bank was established at Faizabad it was the first Bank of India with
Limited Liability to be managed by Indian Board. After Independence, In 1958 this bank failed.
*.In 1895 Punjab National Bank was establ ished in Lahore in Punjab province of Undivided India. It was
the first bank purely managed by Indian. PNB has not only survive but also become the second largest
public sector bank in India.
*.The first Indian commercial bank which was wholly owned and managed by Indians was Central *.Bank of India which was established in 1911. *.Central bank of India was also called India’s First Truly Swadeshi bank. *.The Swadeshi movement inspired local businessmen and political figures to found banks of and for the
Indian community. The period between 1906 and 1911 thousands of Banks were established in India.
Many of those banks established then have survived to the present such as Bank of India, Corporation
Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India.
*.At least 94 banks in India failed between 1913 and 1918 due to economic crisis during World War I.
In 27th January, 1921 Bank of Calcutta, Bank of Madras and Bank of Bombay were amalgamated to
form Imperial Bank of India.
*.In 1926 Hi l ton-Young Commission submitted i t’s report. *.In 1934 Reserve Bank of India act was passed. *.On the recommendation of Hi l ton-Young Commission, On 1st Apri l 1935 Reserve Bank of India was
established.
*.RBI was establ ished wi th ini tial share capi tal worth Rs. 5 crore wi th 5 Lakh Rs. 100 share dividend.
Post-Independence Banking History:
*.Immediately after the Independence, the partition of India in 1947 adversely impacted the economies of Punjab and West Bengal by paralyzing banking activities for months.With end of British rule in India marked the end of a regime of the Laissez-fai re for the Indian banking sector. *.The Government of India initiated measures to play an active role in the economic life of the nation, and the Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed economy. To streaml ine the functioning and activi ties of commercial banks, the government of India has came up wi th the Banking Companies act, 1949. The Reserve Bank of India, India’s central banking authority, was national ized on January 1, 1949 under the terms of the Reserve Bank of India (Transfer to Publ ic Ownership) Act, 1948. *.The Reserve Bank of India was vested wi th major powers for the supervision of banking inn India as he central banking authori ty. *.The Banking Regulation Act also provided that no new bank or branch of an existing bank could be opened without a l icense from the RBI, and no two banks could have common di rectors.
During those days, the general publ ic had lesser confidence in Banking. As an aftermath, the deposi t mobilization
Post-Independence Banking History can be classified into two major categories: ++>Bank National ization in India ++>Bank Liberal ization in India
Nationalised Banks in India – Bank Nationalisation in India: * In India, the Banking Sector has been dominated by Government or Public Sector Banks for last 64 years. In 1954 the Al l India Rural Credit Survey Committee submitted its report recommending creation of a strong,integrated, state-sponsored, state-partnered commercial banking institution with an effective machinery of branches spread all over the country.
*The recommendation of this committee led to establishment of first Public Sector Bank in the name of State bank of India on July 01, 1955 by acquiring the substantial part of share capital by Reserve Bank of India, of then Imperial Bank of India. Similarly during 1956-59, as a result of reorganization of princely states, the State Bank of India associate Bank came into fold of Public sector banking.
*On July 19, 1969, the Govt. promulgated Banking Companies (Acquisition and Transfer of Undertakings)
ordinance 1969 to acquire 14 bigger commercial banks with with deposits over 50 crores. The main objective behind this bank nationalisation was to spread banking infrastructure in rural india and make cheap finance available to Indian farmers.
The second phase of bank nationalisation took place in 1980 during the prime ministerial tenure of Indira Gandhi ,in which 7 more banks were nationalised with deposits over 200 crores. List of Nationalised Banks in India: 1. Allahabad Bank 2. Andhra Bank 3. Bank of Baroda 4. Bank of India 5. Bank of Maharashtra 6. Canara Bank 7. Central Bank of India 8. Corporation Bank 9. Dena Bank 10. Indian Bank 11. Indian Overseas Bank 12. Oriental Bank of Commerce 13. Punjab and Sind Bank 14. Punjab National Bank 15. Syndicate Bank 16. UCO Bank 17. Union Bank of India 18. United Bank of India 19. Vijaya Bank
Bank Liberalisation in India – Liberalisation in Banks: * Liberalisation in banking sector in India noticed in early 1990s’ when India adopted a new economic policy for the development of the nation. Narasimha Rao government embarked on a policy of liberalization, licensing a small number of private banks.For the first time in India new private banks got license for providing banking service. These banks came to be known as the New Generation tech-savvy banks.
*The first bank in India set up after the adaptation of new liberalization policy in banking sector was Global Trust Bank. It was later amalgamated with Oriental Bank of Commerce. The list of banks set up after new
liberalization policy includes Global Trust Bank, UTI Bank (Now known as Axis Bank), ICICI Bank and HDFC Bank.
*This move towards the Liberalisation along with the rapid economic growth in India, re-energize the banking sector in India. Indian banking sector has noticed rapid growth wi th strong contribution from all sector of banks– government banks, private banks and foreign banks.
*The next stage for the Indian banking sector has been set up wi th the proposed relaxation in the norms for
Foreign Direct Investment (FDI). All Foreign Investors in banks can holds up to 74% wi th some restrictions of the company.
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