STORY OF BANK

1. HISTORY OF INDIAN BANKING
A Bank is a financial institution that provides banking and
other financial services. By the term bank generally understood
an institution that hold a Banking Licenses. Banking licenses
are generally granted by financial supervision authorities and
provide right to conduct the most fundamental banking
services such as accepting deposits and making loans. There
are also financial institutions that provide certain banking
services without meeting the legal definition of bank, a so-
called Non-bank. Banks are the subset of the financial services
industry.
The word bank is derived from the Italian banca, which is
derived from German and means bench. The term bankrupt
and “broke” are similar derived from banka rotta, which refers
to an out of business bank having its bench physically broken.
Moneylenders in Northern Italy originally did business in open
areas, or big open rooms, with each lender working from his
own bench or table.
Typically, a bank generates profits from transaction fees on
resources it holds in a trust for client while paying the interest
on the asset. Development of banking industry in India
followed below stated steps.

2.  Banking in India has its origin as early as vedic period .It is
believed that the transaction from money lending to
banking must have occurred even before Manu, the great
Hindu jurist, who has devoted a section of his work to
deposits and advance and laid down the rules relating to
rate of interest.
 Banking in India has its early origin where the indigenous
bankers played a very important role in lending money
and financing foreign trade and commerce. The general
bank of India was the first joint stock bank to be establish
in 1786.The other which followed were the Bank
Hindustan and the Bengal Bank.
 In the first half of the 19th
century the east India Company
established three banks; the bank of Bengal in 1809, the
bank of Bombay in 1840 and the bank of madras in1843.
These three banks are also known as presidency banks
were amalgamated in 1920 and a new bank, the Imperial
bank of India was established in 1921. With the passing of
the State bank of India act in 1955 the undertaking of the
Imperial bank of India was taken by the newly constituted
State bank of India.
 The Reserve Bank of India which is the Central Bank was
created in 1935 by passing Reserve bank of India Act,
1934 which was followed up with the banking regulation
in 1949 .These acts bestowed Reserve bank of India (RBI)
with wide ranging power for licensing, supervision and
control of banks.
 In the post-nationalization era, no new private sector
banks were allowed to be set up. However in 1993 in

3. recognition of the need to introduce greater competition
which could lead to higher productivity and efficiency of
banking system, new private sector banks were allowed
to be set up in the Indian banking system .These new
banks had to satisfy among other, the following minimum
requirement:
1. It should be registered as a public limited company.
2. The minimum paid up capital should be 100 crore
3. The shares should be listed in stock exchange
4. The headquarter of the bank should be preferably
located in a centre which does not have the
headquarters of any other bank ;and
5. The bank will be subject to prudential norms in
respect of banking operations, accounting and
other policies laid down by the RBI. It will have to
achieve capital adequacy of eight percent from the
very beginning.
 The banking industry in India is in midst of
transformation, thanks to the economic liberalization of
the country which has changed business environment in
the country. During the pre-liberalisation period, the
industry was merely focusing on deposit mobilisation
and the branch expansion. But with liberalization, it
found many of its advances under non-performing
asets(NPA)list.

4. Indian banking: key developments
1969  Government acquires ownership in major
banks
 Almost all banking operationin manual
mode
 Some bank had unit record machines of IBM
for IBR & pay roll
1970-
1980
 Unprecedented expansion in geographical
coverage, staff, business & transaction value
and directed lendingto agriculture, SSI & SB
sector
 Manualsystems struggle to handle
exponentialrise in transaction volumes—
 Outsourcing of data processing to service
bureau begins
 Back office systems only in multinational
(MNC)banks’ offices
1981-
1990
 Regulatorled it introductionin banks
 Product level automationon stand alonePCs
at branch
 In-house EDP infrastructure with Unix boxes,
batch processing in cobol for MIS
 Mainframes in corporate office
1991-
1995
 Expansionslows down
 Banking sector reforms resulting in
progressive deregulationof banking,
introductionof prudentialbanking norms
entry of new private sector bank
 Total branch Automation(TBA) in Govt.
owned old private banks begins
 New private banks are set up with CBS/TBA

5. form the start
1996-
2000
 New delivery channelslike ATM, phone
banking and internet banking and
convenienceof any branch banking
 Retail bankingin focus, proliferationof the
credit card
 Communicationinfrastructure improves and
become cheap.
 Commission (CVC),Y2K threat consumes last
two years
2000-
2003
 Alternate delivery channel find wide
consumer acceptance
 IT bill lendinglegal validityto electronic
transaction
 Government owned banks and old private
banks start implementing CBSs, but initial
attempts faces problems
 Banks enter insurance business launch debit
cards.