SUBMITTED BY: AMAN SHAH
EVOLUTION OF INDIAN BANKING
Reserve Bank of India:
1. Initially established in 1935
2. Transfer to Public Ownership in 1949
Three phases of Indian Banking System:
1. Early phase (1935 – 1969)
2. Nationalization of Indian Banks and up to 1991 prior to Indian banking
3. New phase with the advent of Indian Financial & Banking Sector
Nationalization is the process of taking a private industry or private
assets into public ownership by a national government or state
14 banks nationalized in 1969
6 banks nationalized in 1980
Steps taken by the Government of India to Regulate Banking Institutions
in the Country:
1. 1949 : Enactment of Banking Regulation Act.
2. 1955 : Nationalisation of State Bank of India.
3. 1959 : Nationalisation of SBI subsidiaries.
4. 1961 : Insurance cover extended to deposits.
5. 1969 : Nationalisation of 14 major banks.
NEED FOR NATIONALIZATION
Private commercial banks were not fulfilling the social and
developmental goals of banking which are so essential for any
Despite the enactment of the Banking Regulation Act in 1949 and
the nationalisation of the largest bank, the State Bank of India, in
1955, the expansion of commercial banking had largely excluded
rural areas and small-scale borrowers.
Public has lesser confidence in the banks.
Led to slower deposit mobilization.
Savings bank facility provided by the Postal department was
Moreover, loans were largely given to traders.
After nationalisation, public sector bank branches rose to
approximately 800% in deposits and advances took a huge jump by
Banks with Government ownership gave the public implicit faith and
immense confidence about the sustainability of these institutions.
After 1991 reforms and technological up gradation of the banks, the
situation is such that the country is flooded with foreign banks and
their ATM stations.
Efforts are being put to give a satisfactory service to customers.
Phone banking and net banking is introduced. The entire system
became more convenient and swift.
EFFECTS OF NATIONALIZATION
Increase in number of branches
More concentration of banks in rural, unbanked and under
Increase in deposits, lendings
Priority sector lendings were introduced.
As a result of nationalization, the number of bank branches increased rapidly
8262 branches (July 1969) to 64980 (June 1999), 68339 (June 2005) and 71839
Out of all bank offices, Rural banks made up:
1. 22.4% in June 1969
2. 50.5% in June 1999
Breakdown of bank branch structure in June 2005:
1. Rural: 47.0%
2. Semi Urban: 22.5%
3. Urban: 16.8%
4. Metropolitan: 13.7%
1. No. of branches in India: 101261
2. No. of commercial banks – 173 (scheduled: 169, non scheduled: 4)
3. RRB branches: 82
INCREASE IN DEPOSITS
Expansion of banking system led to increase in the amount of
1. Deposits: 4880 crore rupees
1. Aggregate Deposits in SCB 59090 billions: 59.09 lakh crore
We can also see an increase in loans after the reform period
1. Loans: 3,06,829 lakh rupees
1. 919189 Crore Rupees
It is increasing at the rate of 10-15% per year since the