History of Banking in India
History of Banking in India: India’s banking sector reforms include legislative changes that will increase the sector’s effectiveness, stability, and competitiveness. They emphasize on governance, risk management, financial inclusion, and the overall resilience of the financial sector. These changes are made to support the nation’s economic development and progress.
Banking sector development can be divided into three phases
During the pre-independence period, major banks faced challenges such as fraud-prone Indian account holders, limited machines and technology, human errors causing delays, inadequate facilities, and a lack of proficient management skills. However, the post-independence period witnessed substantial changes, leading to significant advancements in the banking industry that continue to evolve today.
Bank Name | Year of Establishment |
Allahabad Bank | 1865 |
Punjab National Bank | 1894 |
Bank of India | 1906 |
Central Bank of India | 1911 |
Canara Bank | 1906 |
Bank of Baroda | 1908 |
After India’s independence, the domination of privately owned major banks raised concerns as rural communities remained reliant on money lenders for financial aid. To address this issue, the government undertook the nationalization of banks, operating under the Banking Regulation Act of 1949.
In 1949, the Reserve Bank of India was also nationalized. Subsequently, the State Bank of India was established in 1955, while the remaining 14 banks with national deposits exceeding 50 crores were progressively nationalized between 1969 and 1991.
This initiative aimed to provide greater financial assistance and accessibility to rural areas and reduce dependence on money lenders.
The list of these 14 Banks Nationalized in 1969
In the year 1980, another 6 banks were nationalized, taking the number to 20 banks. These banks included
Apart from the above-mentioned 20 banks, there were seven subsidiaries of SBI which were nationalized in 1959
All banks were later merged with the State Bank of India in 2017, except for the State Bank of Saurashtra, which merged in 2008, and the State Bank of Indore, which merged in 2010.
These are the reasons why the Government chose to nationalize the banks. The impact of Nationalising Banks in India is given below:
The ongoing phase of banking sector development after the establishment of banks in the country is crucial as it requires consistent monitoring and adherence to regulations in order to sustain the profitability provided by the banking sector.
In order to ensure stability and profitability for Nationalised Public sector Banks, the Government has established a committee headed by Shri. M Narasimham to oversee and implement various reforms in the Indian banking industry.
RBI gave licenses to 10 Private sector banks to establish themselves in the country. This was the biggest development in the banking sector of the country. These banks included:
The Other Measures taken include
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The history of banking in India began in the late 18th century.
The Reserve Bank of India (RBI) was established in 1935.
The establishment of regional rural banks (RRBs) in 1975 aimed to provide banking facilities to rural areas.
The introduction of core banking solutions (CBS) in the 2000s facilitated seamless banking services across branches
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