2. History of Banking in India
The first bank in India was established in 1786. From 1786 till today it
has gone through three distinct phases
Phase1: Early phase from 1786 to 1969
Phase2: Nationalization of Indian Banks and up to 1991 prior to Indian
banking reforms
Phase3: New phase of Indian Banking system with the advent of the
Indian Financial Banking sector reforms after 1991
3. PHASE 1
• The General Bank of India was established in 1786. Then came the
Bank of Hindustan and Bengal Bank.
• The East India company established Bank of Bengal (1809), Bank of
Bombay (1840), Bank of Madras (1843) and these banks called as
Presidency Bank.
• These three banks were amalgamated in 1920 and named as the
Imperial Bank of India, which was started as the private shareholder
bank mostly European shareholder.
4. PHASE1 (CONT……)
• In 1865 Allahabad Bank was established and first time exclusively by
Indians, Punjab National Bank Ltd was setup in 1894 with
headquarter in Lahore.
• Between 1906 to 1913 many banks were established namely Canara
Bank, Central Bank, Bank of India, Bank of Baroda, Indian Bank, Bank
of Mysore were established. There were approximately 1100 banks
mostly small was established.
• To streamline the banks and to gain control over the banks Govt. of
India came up with The Banking Companies Act in 1949 which was
later changed to Banking Regulation Act 1949.
5. PHASE 2
• Government took some major steps to bring reforms in the Indian
banking sector after independence.
• On the eve of independence in 1947, there were 648 commercial
banks comprising of 97 scheduled and 551 non-scheduled banks.
• In 1955, it nationalized The Imperial Bank of India with extensive
banking facilities on a large scale especially in rural and semi-urban
areas. It formed as State Bank of India (SBI) to act as the principal
agent of RBI.
• In 1969 late Prime Minister Mrs. Indira Gandhi nationalized 14
commercial banks with deposits of Rs. 50 Crore.
6. PHASE2 (CONT……)
• 1949: Enactment of Banking Regulation Act
• 1955: Nationalization of SBI
• 1959: Nationalization of SBI Subsidiaries
• 1961: Insurance cover extended to deposits
• 1969:Nationalization of 14 commercial banks
• 1971:Creation of credit guarantee corporation
• 1975:Creation of Regional Rural Banks (RRB)
• 1980:Nationalization of banks with deposits over 200 crore
7. List of 14 Banks nationalized in 1969
• Allahabad Bank
• Bank of India
• Punjab National Bank
• Bank of Baroda
• Bank of Maharashtra
• Central Bank of India
• Canara Bank
• Dena Bank
• Indian Overseas Bank
• Indian Bank
• United Bank
• Syndicate Bank
• Union Bank of India
• UCO Bank
8. List of 6 Banks nationalized in 1980
• Andhra Bank
• Corporation Bank
• New Bank of India
• Oriental Bank of Commerce
• Punjab & Sindh Bank
• Vijaya Bank
9. PHASE 3
• This phase brought many more facilities in the banking sector. In
1991, under the chairmanship of Mr. M Narasimham, a committee
was set up which worked for the liberalization of banks in India.
• After this country is flooded with the Foreign banks and ATMs.
• Phone Baking and Net banking was introduced.
10. RBI
• RBI (Reserve Bank of India) came into existence in 1935 as the central
banking authority of India with a share capital of Rs 5 crores on the
basis of recommendation of Hilton Young Commission.
• RBI was nationalized in 1949.
11. BANKING DEVELOPMENT: PRE-NATIONALIZATION
• Credit was excessively skewed in favor of large borrowers
• Agriculture Sector got only 2% of total bank credit
• Features with the goal of achieving the equitable allocation of credit
and relative priorities set out in the five year plans
12. RATIONALE FOR NATIONALIZATION
• Removal of control of few large Industrial and Business houses
• Provision for adequate credit for Agriculture, Small Industries, exports
etc.
• Giving Professional bent to management
• Encouraging a new class of entrepreneurs
• Change over from class banking to mass banking
13. Impact of Nationalization
• Unprecedented growth in the branch network of the commercial
banks
• Rapid growth in deposit mobilization and expansion of credit
• However commercial banks faces decline in profitability
• Directed lending and less flexibility
• Increase cost of operations
14. Formation of Regional Rural Banks
• Formation of Regional Rural Banks under the act of RRB 1976
• These are state sponsored, Region based, Rural based, Rural oriented,
commercial banks
• Under this approach 196 RRBs were setup
15. Types of Banks
• Public Sector Banks
• State Bank of India and its associate banks called the State Bank Group.
• 20 nationalized banks.
• Regional rural banks mainly sponsored by public sector banks.
• Private Sector Banks
• Private Banks
• Foreign banks operating in India.
• Scheduled co-operative banks.
• Non-scheduled banks
16. Types of Banks
• Co-operative Sector
• State co-operative Banks
• Central co-operative banks
• Primary Agriculture Credit Societies
17. Types of Banks
• Development Banks/Financial Institutions
• IFCI
• IDBI
• ICICI
• IIBI
• NABARD
• Export Import Bank of India
• National Housing Bank
