History of Banking in India

Only available on StudyMode
  • Topic: Bank, Banks of India, India
  • Pages : 8 (2475 words )
  • Download(s) : 3122
  • Published : July 23, 2010
Open Document
Text Preview
Structure of the organised banking sector in India.
Number of banks are in brackets.
Banking in India
From Wikipedia, the free encyclopedia
Banking in India originated in the last decades of the 18th
century. The oldest bank in existence in India is the State
Bank of India, a government-owned bank that traces its
origins back to June 1806 and that is the largest commercial bank in the country. Central banking is the responsibility of the Reserve Bank of India, which in 1935 formally took over
these responsibilities from the then Imperial Bank of India, relegating it to commercial banking functions. After India's independence in 1947, the Reserve Bank was nationalized
and given broader powers. In 1969 the government
nationalized the 14 largest commercial banks; the
government nationalized the six next largest in 1980.
Currently, India has 88 scheduled commercial banks (SCBs)
- 27 public sector banks (that is with the Government of
India holding a stake), 31 private banks (these do not have
government stake; they may be publicly listed and traded on
stock exchanges) and 38 foreign banks. They have a
combined network of over 53,000 branches and 17,000
ATMs. According to a report by ICRA Limited, a rating
agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively
1 Early history
2 From World War I to Independence
3 Post-independence
4 Nationalisation
5 Liberalisation
6 Further reading
7 Notes
8 See also
9 External links
Early history
Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India which started in 1786, and the Bank of Hindustan, both of which are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which Banking in India - Wikipedia, the free encyclopedia http://en.wikipedia.org/wiki/Banking_in_India 1 of 5 9/12/2009 11:04 AM

The Bank of Bengal, which later became the
State Bank of India.
almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1925 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India.

Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint Stock bank in India. It was not the first though. That honor belongs to the Bank of Upper India, which was established in 1863, and which survived until 1913, when it failed, with some of its assets and liabilities being transferred to the Alliance Bank of Simla.

When the American Civil War stopped the supply of cotton to Lancashire from the Confederate States, promoters opened banks to finance trading in Indian cotton. With large exposure to speculative ventures, most of the banks opened in India during that period failed. The depositors lost money and lost interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century.

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; branches in Madras and Pondichery, then a French colony, followed. HSBC established itself in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade of the British Empire, and so became a banking center. The first entirely...
tracking img