Banking Industry Analysis

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(Indian banking industry experienced a 360 - degree change)
The history of banking system in India started with the establishment of the first joint stock bank, the General bank of India in the year 1786. In the mid of 19th century, East India Company established three banks. These banks were independent units and called Presidency banks. These three banks were amalgamated in 1920 and a new bank, Imperial bank of India was established which started as private shareholders bank, mostly European shareholders. Reserve Bank of India (RBI) was constituted in the year 1935 as an apex bank without major government ownership. In the year 1949, Govt. of India enacted "The Banking Regulations Act" in order to streamline the functioning and activities of commercial banks. This act brought Reserve Bank of India under government control. Under the act, RBI got wide ranging powers for supervision & control of banks. In 1955, RBI acquired control of the Imperial bank of India, which was renamed as SBI. In 1959, SBI took over control of eight private banks floated in the erstwhile princely states, making them as its 100% subsidiaries. In July 1969, government nationalized 14 banks having deposits of Rs. 50 Crores & above. In 1980, government acquired 6 more banks with deposits of more than Rs 200 Crores. The purpose of nationalization of banks was to make them play the role of catalytic agents for economic growth.

The financial sector reforms undertaken in India from 1991 onwards were basically to ensure the safety and soundness of financial institutions and at the same time making the banking system strong, efficient, functionally diverse and competitive. The reforms included lowering of CRR and SLR, liberalization of the interest rate regime, allowing banks the freedom to choose their deposit and lending rates,...
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