History of Banking In India –

Evolution of Banking System

in India

Banking is considered to be the “Backbone of a Nation’s Economy”.

The Indian Banking, today, is divided into commercial banks which

are Private, Public scheduled and non-scheduled banks, Regional

and Rural, and Cooperative Banks.

Banking Companies Act of 1949 defined banking as accepting for

the purpose of lending or investment of depositing money from the

public, repayable on demand or otherwise and withdrawable by

cheque draft or otherwise. Let us learn more about the History of

Banking System in India.

The Banking sector in India has seen a lot of transitions and changes over the

centuries. It can be broadly categorized into 3 sub-parts that are:

1. Pre-Independence (Before 1947)

2. II Phase (1947 to 1991)

3. III Phase (1991 and beyond).

Banking during Pre-Independence (1770 to 1947)

India began with the establishment of the Bank of Hindustan in 1770 but it

stopped operating by 1832.

During this period, over 600 banks were established. However, very few were

able to succeed. Some of the banks were –

 The General Bank of India (1786-1791)

 Bank of Bengal (1809)

 Bank of Bombay (1840)

 Oudh Commercial Bank (1881-1958)

 Bank of Madras (1843)

This phase also witnessed the alliance of the 3 major banks – Bank of Bengal,

Bank of Madras, and Bank of Bombay established by The East India Company.

They together amalgamated and formed the Imperial Bank. This was taken over

by the SBI (State Bank of India) in 1955.

Other Banks that were established during this time were – Allahabad Bank (est.

1865), Punjab National Bank (est. 1894), Bank of India (est. 1906), Bank of Baroda

(est. 1908), and Central Bank of India (est. 1911).

period, the following conclusions can be drawn:

 Indian account holders had become fraud-prone.

 Lack of machines and technology.

 xHuman errors & time-consuming.

 Fewer facilities.

 Lack of proper management skills

Following the Pre-Independence period was the post-independence period which

observed some major changes in the banking industry scenario and has to date

developed a lot.

II The then Government – after Indian Independence, decided to nationalize the

Banks because all the major banks were led privately which was a cause of

concern as people in the rural areas still turned to money lenders for assistance.

Under the Banking Regulation Act, 1949, these banks were nationalized and the

Reserve Bank of India was nationalized in 1949. These banks are:

1. Allahabad Bank

2. Bank of India
 3. Bank of Baroda

4. Central Bank of India

5. Bank of Maharashtra

6. Canara Bank

7. Dena Bank

8. Indian Overseas Bank

9. Indian Bank

10.Punjab National Bank

11.Syndicate Bank

12.Union Bank of India

13.United Bank

14.UCO Bank

In 1980, 6 other banks were nationalized that are:

1. Andhra Bank

2. Corporation Bank
 3. New Bank of India

4. Oriental Bank of Comm.

5. Punjab & Sind Bank

6. Vijaya Bank

Seven subsidiaries of SBI which were nationalized in 1959:

1. State Bank of Patiala

Phase of Indian Banking – Banking Post Independence (1947 to 1991)

1. State Bank of Hyderabad

2. State Bank of Bikaner & Jaipur

3. State Bank of Mysore

4. State Bank of Travancore

5. State Bank of Saurashtra

6. 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. State Bank of Indore

was merged in 2010.

There were several reasons for nationalism in the banks of India that are:

1. Nationalism led to an increase in funds and thereby increased the economic

condition of the country.

2. It increased efficiency.

3. It helped in boosting the rural and agricultural sector of the country.

4. This opened up a major employment opportunity for the people.

5. The profit gained by Banks was used by the Government for the betterment

of the people.

6. The competition was decreased and work efficiency had increased.

The post-independence phase was the one that led to the major development of

the banking sector in India.

III Phase of Indian Banking(1991 to beyond)

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.

RBI gave license to 10 Private sector banks to establish themselves in the country.

These banks included:

1. Global Trust Bank

2. ICICI Bank

3. HDFC Bank

1. Axis Bank

2. Bank of Punjab

3. IndusInd Bank

4. Centurion Bank

5. IDBI Bank

6. Times Bank

7. Development Credit Bank

A majority of Indian citizens shifted to online or net banking.

List of Public Sector Banks and Private Sector Banks in India are:

1. Axis Bank
2. Bank of Baroda

3. Bank of India

4. Bandhan Bank

5. Bank of Maharashtra

6. Canara Bank

7. Central Bank of India

8. City Union Bank

9. Dhanlaxmi Bank

10.Federal Bank

11.HDFC Bank

12.IDBI Bank

13.Indian Bank

14.Indian Overseas Bank

15.ICICI Bank

16.IDFC Bank
 17.Indusind Bank

18.Karnataka Bank

19.Karur Vysya Bank

20.Kotak Mahindra Bank

21.Lakshmi Vilas Bank

1. Punjab National Bank

2. Punjab & Sind Bank

3. RBL Bank

4. State Bank of India

5. South Indian Bank

6. UCO Bank

7. Union Bank of India

8. Yes Bank

List of Small Finance Banks in India:

1. Capital Small Finance Bank

3. Utkarsh Small Finance Bank

4. Suryoday Small Finance Bank

5. Ujjivan Small Finance Bank

6. ESAF Small Finance Bank

7. Au Small Finance Bank

8. Fincare Small Finance Bank

9. North East Small Finance Bank

10.Jana Small Finance Bank

List of payment banks in India:

1. Airtel Payment Bank Ltd.

2. Paytm Payments Bank

3. Fino Payments Bank

4. Jio Payments Bank

5. Aditya Birla Idea Payments Bank

Conclusion

The banks have revolutionized over the years. The Banking sector is extremely

important for a country’s economy. In order to keep the system to thrive,

estimated interval changes and modifications are to be made.