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ORIGIN OF BANKING
It is of Germanic origin though some persons trace its origin to the French word ‘Banqui’ and the Italian word ‘Banca’. It referred to a bench for keeping, lending, and exchanging of money or coins in the market place by money lenders and money changers.
The first bank called the ‘Bank of Venice’ was established in Venice, Italy in 1157
A bank is a financial institution which deals with deposits and advances and other related services. It receives money from those who want to save in the form of deposits and it lends money to those who need it. A bank is a financial institution and a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly by loaning or indirectly through capital markets. A bank is a connection between customers that have capital deficits and customers with capital surpluses.
HISTORY OF BANKING IN INDIA
PRE INDEPENDENCE PERIOD (1786- 1947)
The first bank of India was the “Bank of Hindustan”, established in 1770 and located in the then, Indian capital, Calcutta. However, this bank failed to work and ceased operations in 1832.
During the Pre Independence period over 600 banks had been registered in the country, but only a few managed to survive.
Following the path of Bank of Hindustan, various other banks were established in India. They were:
During the British rule in India, the East India Company had established three banks: Bank of Bengal, Bank of Bombay and Bank of Madras and called them the Presidential Banks. These three banks were later merged into one single bank in 1921, which was called the “Imperial Bank of India.”
The Imperial Bank of India was later nationalised in 1955 and was named The State Bank of India, which is currently the largest Public sector Bank.
Given below is a list of other banks which were established during the Pre-Independence period:
Pre-Independence Banks in India
Allahabad Bank (1865)
Punjab National Bank (1894)
Bank of India (1906)
Central Bank of India (1911)
Canara Bank (1906)
Bank of Baroda (1908)
Reasons as to why many major banks failed to survive during the pre-independence period, the following conclusions can be drawn:
POST-INDEPENDENCE PERIOD (1947-1991)
At the time, when India got independence, all the major banks of the country were led privately which was a cause of concern as the people belonging to rural areas were still dependent on money lenders for financial assistance.
With an aim to solve this problem, the then Government decided to nationalise the Banks. These banks were nationalised under the Banking Regulation Act, 1949. Whereas, the Reserve Bank of India was nationalised in 1949.
Following it was the formation of State Bank of India in 1955 and other 14 banks were nationalised between the time duration of 1969 to 1991. These were the banks whose national deposits were more than 50 crores.
Given below is the list of these 14 Banks nationalised in 1969:
Bank of India
Bank of Baroda
Bank of Maharashtra
Central Bank of India
Indian Overseas Bank
Punjab National Bank
Union Bank of India
In the year 1980, another 6 banks were nationalised, taking the number to 20 banks. These banks included:
New Bank of India
Oriental Bank of Comm.
Punjab & Sind Bank
Apart from the above mentioned 20 banks, there were seven subsidiaries of SBI which were nationalised in 1959:
State Bank of Patiala
State Bank of Hyderabad
State Bank of Bikaner & Jaipur
State Bank of Mysore
State Bank of Travancore
State Bank of Saurashtra
State Bank of Indore
All these banks were later merged with the State Bank of India in 2017, except for the State Bank of Saurashtra, which was merged in 2008 and State Bank of Indore, which was merged in 2010.
There were various reasons why the Government chose to nationalise the banks. Given below is the impact of Nationalising Banks in India:
This post Independence phase was the one that led to major developments in the banking sector of India and also in the evolution of the banking sector.
LIBERALISATION PERIOD (1991-TILL DATE)
Once the banks were established in the country, regular monitoring and regulations need to be followed to continue the profits provided by the banking sector. The last phase or the ongoing phase of the banking sector development plays a significant role.
To provide stability and profitability to the Nationalised Public sector Banks, the Government decided to set up a committee under the leadership of Shri. M Narasimham to manage the various reforms in the Indian banking industry.
The biggest development was the introduction of Private sector banks in India. RBI gave license to 10 Private sector banks to establish themselves in the country. These banks included:
Global Trust Bank
Bank of Punjab
Development Credit Bank
The other measures taken include:
Thus, the history of banking in India shows that with time and the needs of people, major developments have been done in the banking sector with an aim to prosper it.
NEW MERGERS INCLUDE:
WHY MERGER IS GOOD? – BENEFITS FOR VARIOUS STAKEHOLDERS:
Concerns associated with merger: