Evolution of banking

Pre Independence Period (1786-1947):

·       The first bank of India was the “​Bank of Hindustan​”, established in 1770 and located in the then, Indian capital, Calcutta. However, this bank failed to work and ceased operations in 1832.

·       During the Pre Independence period over 600 banks had been registered in the country but only a few managed to survive.

·       Following the path of Bank of Hindustan, various other banks were established in India. They were: The General Bank of India, Bank of Bengal, Bank of Bombay, Bank of Madras.

·       During the British rule in India, The East India Company had established three banks: Bank of Bengal, Bank of Bombay and Bank of Madras and called them the Presidential Banks. These three banks were later merged into one single bank in 1921 which was called the “​Imperial Bank of India.​”

·       The Imperial Bank of India was later nationalized in 1955 and was named The State Bank of India, which is currently the largest Public sector Bank.

Post Independence Period (1947-1991):

·       At the time, when India got independence, all the major banks of the country were led privately which was a cause of concern as the people belonging to rural areas were still dependent on money lenders for financial assistance.

·       With an aim to solve this problem, the then Government decided to nationalise the Banks. These banks were nationalised under the Banking Regulation Act, 1949 and the Reserve Bank of India was nationalised in 1949.

·       Following it was the formation of State Bank of India in 1955 and other 14 banks were nationalized between the time duration of 1969 to 1991. These were the banks whose national deposits were more than 50 crores.

Liberalization Period (1991-Till date):

·       Once the banks were established in the country, regular monitoring and regulations need to be followed to continue the profits provided by the banking sector. The last phase or the ongoing phase of the banking sector development plays a very important role.

·       To provide stability and profitability to the Nationalised Public sector Banks, the Government decided to set up a committee under the leadership of Shri. M Narasimham to manage the various reforms in the Indian banking industry.

·       The biggest development was the introduction of Private sector banks in India. RBI gave license to 10 Private sector banks to establish themselves in the country.

·       Other measures include:

o   Setting up of branches of foreign banks in India

o   RBI and Gov would treat public and private banks equally

o   Any Foreign Bank could start joint ventures with Indian Banks

o   Payments banks were introduced with the development in the field of banking and technology

o   Small Finance Banks were allowed to set their branches across India.