History of banking in India – GK banking history in India for exams preparation

History of banking in India – GK banking history in India for exams preparation

Indian banking history starts in ancient time and banking has been a significant part of our lives for a very long time in India. The Banking history of India has seen a lot of stages & has been continuously evolving since then. Here you will find a brief history of Indian banking from 1770 to till date so that it can be useful for competitive examination preparation. If you are preparing for Banking Sector & SSC Examinations then it is very important to prepare well for the topic ‘History of Banking in India‘ or ‘Banking History in India’ that might be asked in the general awareness section of competitive exams in India specially in banking sector & SSC exams.  So we give you a detailed history of banking in India prepared from the point of view of competitive examinations in India.

Introduction History of Banking in India

According to the banking companies act of 1949 indian banking is defined as accepting for the purpose of lending or investment of deposit money from the public repayable on demand or otherwise and withdrawable by cheque draft order or otherwise.

The first bank established in India was Bank of Hindustan which was established in 1770. Second was The General Bank of India which established in 1786. The oldest bank still in existence in India is the State Bank of India which is known as SBI Bank. It was originated in the Bank of Calcutta in June 1806. Bank of Bengal, Bank of Bombay and Bank of Madras these three banks merged in 1921 to form the Imperial Bank of India which was converted as State Bank of India (SBI) in 1955. The first Indian bank to have been started solely with Indian capital investment is Punjab National Bank (PNB). The first Indian bank to open overseas branch is Bank of India (BOI). It established a branch in London in 1946. The oldest existing Public Sector Bank in India is Allahabad Bank.

The first Indian commercial bank owned and managed by Indians is Central Bank of India Lala Lajpat Rai was the founder of Punjab National Bank. Union Bank of India (UBI) bank was inaugurated by Mahatma Gandhi in 1919. The Reserve Bank of India was instituted in 1935. The first bank in India with an ISO Certification is Canara Bank. The first time banks were nationalized in India was on 19 July 1969. Osborne Smith was the first governor of the Reserve Bank. CD Desmukh was the first Indian to be the governor of Reserve Bank. Savings account system in India was started by Presidency Bank 1833. Bengal Bank established in 1784 was the first bank to introduce cheque system. ICICI Bank was the first Indian bank to provide internet banking facility. First bank to introduce ATM in India was HSBC in 1987 Mumbai. Central Bank of India was the first public sector bank to introduce Credit card. ICICI is the first bank to provide mobile ATM. Bank of Baroda has the maximum number of overseas branches. When it comes to the total number of maximum branches in the world State Bank of India (SBI) holds 2nd Position.

History of Banking in India – Various Stages of Evolution

The history of Banking can be mainly categorized into 3 stages –

  • Pre Independence Stage – Before 1947
  • II Phase – 1947 to 1991
  • III Phase – 1991 & beyond

History of banking in India pre independence stage

  • The banking in India Pre Independence stage has seen significant events. This phase marks the presence of more than 600 banks
  • The Banking system in India started with the foundation of the Bank of Hindustan in 1770 but it ceased to operate in 1832
  • This phase also saw the alliance of 3 major banks – Bank of Bengal, Bank of Bombay & Bank of Madras. They were amalgamated and called Imperial Bank which was taken over by State Bank of India (SBI) in 1955
  • A few of the banks were established in this period as listed below
Bank in India Bank Founded In Headquarter
Allahabad Bank 1865 Kolkata
Andhra Bank 1923 Hyderabad
Bank of Baroda 1908 Vadodara
Bank of India 1906 Mumbai
Canara Bank 1906 Bangalore
Central Bank of India 1911 Mumbai
Corporation Bank 1906 Mangalore
Dena Bank 1938 Mumbai
IDBI Bank Limited 1964 Mumbai
Indian Bank 1907 Chennai
Indian Overseas Bank 1937 Chennai
Oriental Bank of Commerce 1943 Gurgaon
Punjab & Sind Bank 1908 New Delhi
Punjab National Bank 1895 New Delhi
State Bank of India 1955 Mumbai
Syndicate Bank 1925 Manipal
UCO Bank 1943 Kolkata
Union Bank of India 1919 Mumbai
United Bank of India 1950 Kolkata
Vijaya Bank 1931 Bangalore

History of Banking from 1947 to 1991

  • In this phase a major event that took place was Nationalization of the Bank
  • The Reserve Bank of India (RBI) was nationalized on 1st January 1949
  • Along with Nationalization Regional Rural Banks were formed on 2nd October 1975
  • Nationalization & its Impacts
  • Due to the nationalization of banks the efficiency of the banking system in India improved
  • This also boosted the confidence of the public in banks
  • The sectors that were lagging behind like small-scale industries and agriculture got a boost
  • This led to an increase in funds and thus an increase in the economic growth of India
  • The nationalization of banks also increased the penetration of banks
  • This was mainly seen in the rural areas of India

History of Banking – Beyond 1991

  • The years after 1991 saw remarkable growth in the process of development of banks with the liberalization of economic policies
  • It was a phase of expansion consolidation and increment in many way
  • RBI gave license to 10 private entities which include – ICICI, Axis Bank, HDFC, DCB, Indusland Bank. Other than these 3 phases you can also consider the Modern Phase

Modern Phase:

This is the phase of “New Generation” tech-savvy banks. This phase can be called as “The Reforms Phase of Banking in India”. Currently banking in India is generally fairly mature in terms of supply product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks.

History of Banking in India – Current Indian Banking Scenario

Banks in India can be categorized into Scheduled and Non-scheduled Banks.

1) Scheduled Banks Scheduled Banks in India constitute those banks which have been included in the Second Schedule of Reserve Bank of India (RBI) Act 1934. These banks should fulfill two conditions:

  • Paid-up capital and collected funds should not be less than Rs.5 lakhs
  • Any activity of the Bank should not be detrimental or adversely affect the interests of the customers. It comprises Commercial Banks and Cooperative Banks. Commercial Banks are both scheduled and Non-scheduled commercial banks regulated Banking Regulations Act 1949. Commercial Banks works on a ‘Profit Basis’ and is engaged in the business of accepting deposits for the purpose of advances / loans. There are four types of Scheduled Commercial Banks:
  • Public Sector Banks
  • Private sector Banks
  • Foreign Banks
  • Regional Rural Banks

2) Non-scheduled bank Non- Scheduled Banks in India means “a banking company as defined in clause (c) of section 5 of the Banking Regulation Act 1949 (10 of 1949) which is not a scheduled bank”.  Reserve Bank of India (RBI) is the central bank of the nation and all Banks in India are required to follow the guidelines issued by RBI.

Banks in India can also be classified in a different ways:

  • Public Sector Banks: They are those banks where government is the owner or having more than 51% stake in the capital. Currently there are 21 Public Sector Banks in India including 19 Nationalized Banks. State Bank of India (SBI) and its 5 Associate Banks together called State Bank Group
  • Private Sector Banks: Private Banks are owned by private individuals / institutions. These are registered under the Companies Act 1956 as Limited Companies
  • Regional Rural Banks (RRBs): Previously these were 196 Regional Rural Banks sponsored by 27 State Cooperative Banks. As on 31st March 2013 due to mergers their number has come down from 196 to 64
  • Foreign Banks: These banks are incorporated outside India and are operating branches in India also. Some foreign banks are also having their representative offices in India
  • Development Banks:

These include Industrial Finance Corporation of India (IFCI) established in 1948

Export-Import Bank of India (EXIM Bank) established in 1982

National Bank for Agriculture & Rural Development (NABARD) established in 1982 and Small Industries Development Bank of India (SIDBI) established on 2nd April 1990

History of Banking in India – Indian Banking History Reforms

  • The Indian banking sector is an important constituent of the Indian financial system
  • The banking sectors play a vital role in promoting business in urban as well as in rural areas in recent years
  • Without in India cannot be considered as a healthy economy
  • For the past three decades India’s banking system has several outstanding achievements to its credit
  • NPA’s have increased since 2011 after a steady decline in the 2000’s

History of Banking in India – Banking History Study Notes

The banking system in India through a measure gradual caution and steady process has undergone a substantial transformation. Banks have come a long way from the temples of the ancient world but their basic business practices have not changed. Even if the future takes banks completely off your street corner and onto the internet or has you shopping for loans across the globe the banks will still exist to perform this primary function. Hope that this post article on the history of banking in India is useful for competitive exams preparation.

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