EVOLUTION OF BANKING INDUSTRY

IN INDIA

PREPARED BY: - SHRADDHA PATEL

HISTORY

• Banking in India originated in the last decades of the 18th century.

• The first bank in India, though its conservative, but still it was established in 1786 in Calcutta by the name of Bank of Bengal.

PHASES OF BANKING HISTORY

• From 1786 till today, the journey of Indian Banking System can be segregated into four distinct phases.

EARLY PHASE(1786 TO 1935)

PRENATIONALIZATION

(1935 TO 1969)

POST NATIONALIZATION

(1969 TO 1990)

MODERN PHASE

(1991 TILL DATE)

224 years

EARLY PHASE(1786 TO 1935)

• The first banks were The General Bank of India, which started in 1786, and the Bank of Hindustan.

• The oldest bank in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806.

• The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks.

• Foreign banks too started to arrive, particularly in Calcutta, in the 1860s.

• The Comptoire d’ Escompte de Paris opened a branch in Calcutta in 1860 and another in Bombay in 1862.

• HSBC established itself in Bengal in 1869.

• The Reserve Bank of India was set up on the recommendations Royal Commission on Indian Currency and Finance. (Hilton- young).

• The Government, on December 20, 1934 issued a notification and on January 14, 1935, the RBI came into existence, though it was formally inaugurated only on April 1, 1935.

PRE NATIONALIZATION PHASE (1935 TO 1969)

• RBI was created with the central task of maintaining monetary stability in India.

• The Reserve Bank served as the central bank of Pakistan up to June 1948.

• 1955 The Industrial Credit and Investment Corporation of India Limited (ICICI) was incorporated at the initiative of World Bank.

• Industrial Development Bank of India Limited (IDBI) was established in1964 by an Act of Parliament.

POST NATIONALIZATION PHASE (1969 TO 1990)

• On July 19, 1969 the erstwhile government of India nationalized 14 major private banks. 

LIST OF NATIONALISED BANKS IN 1969

1 Central Bank of India         8 Indian Overseas Bank

2 Bank of Maharashtra 9 Bank of Baroda

3 Dena Bank  10 Union Bank

4 Punjab National Bank 11 Allahabad Bank

5 Syndicate Bank 12 United Bank of India

6 Canara Bank 13 UCO Bank

7 Indian Bank  14 Bank of India

• The need for the nationalization was felt mainly because private commercial banks were not fulfilling the social and developmental goals of banking.

• It was a phase of expansion, consolidation and increment in many ways.

• National Bank for Agricultural and Rural Development (NABARD) was set up in 1982, as an apex institution for agricultural and rural credit.

• Board for Industrial & Financial Reconstruction (BIFR) came into existence under Sick Companies (Special Provisions) Act 1985 and started its operations on May 15, 1987.

  MODERN PHASE

FROM 1991 TILL DATE• This phase has introduced many more products

and facilities in the banking sector in its reforms measure.

• In 1991, under the chairmanship of M Narasimham, a committee was set up by his name which worked for the liberalisation of banking practices.

• The country is flooded with foreign banks and their ATM stations.

• Phone banking and net banking is introduced.

• The entire system became more convenient and swift. Time is given more importance than money.

• The financial system of India has shown a great deal of resilience.

• This is all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is not yet fully convertible, and banks and their customers have limited foreign exchange exposure.

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