Evolution of Banking in India
India is a country with a rich history and culture. From the ancient civilizations of the Indus Valley to the modern day, India has always been a land of opportunity. And this is especially true when it comes to banking. The banking sector in India has come a long way from its humble beginnings. From the first Indian bank established in 1806 to the present day, Indian banks have undergone a massive transformation. In this blog post, knowledge glow will take a look at the evolution of banking in India and how it has changed over time.
The History of Banking in India
The history of banking in India can be traced back to the early 18th century with the establishment of the Bank of Bengal in 1784. This was followed by the establishment of three more presidency banks, namely the Bank of Bombay (1840), the Bank of Madras (1843) and the Bank of Calcutta (1873). These four banks were collectively known as the Presidency Banks. In 1921, they were amalgamated to form the Imperial Bank of India.
Post-Independence, the Reserve Bank of India (RBI) was established in 1935 and it became the central bank of India. The Banking Regulation Act 1949 was enacted to regulate banking activities in India and to consolidate and ameliorate the laws relating to banking. After this act was passed, a number of banks were nationalized including Central Bank of India (1955), Union Bank of India (1969), Punjab National Bank (1970) and Canara Bank (1971).
In 1980, six more banks were nationalized which included Allahabad Bank, Andhra Pradesh State Financial Corporation, Oriental Bank Corporation, United Commercial Bank Ltd., NewBank of India Ltd. and SyndicateBank Ltd. The Indian banking sector saw another round off consolidation in 1993 with New Consolidation Scheme for Public Sector Banks. This scheme resulted in mergers of five banks namely Dena Bank with UCO bank, United Western Bank with Punjab Nationalist bank, NewbankofIndiawith Central bankofindia ,
Pre Independence Period (1786-1947)
Prior to independence, banking in India was largely dominated by foreign institutions. The first bank in India, the Bank of Bengal, was established in 1809 under the auspices of the British East India Company. This was followed by the establishment of the Bank of Bombay (1840) and the Bank of Madras (1843).
The Indian Rebellion of 1857 briefly disrupted the banking sector but it soon recovered. In 1861, the Government of India enacted the Banks Act which paved the way for the setting up of new banks and regulated the functioning of existing ones.
In 1876, two more banks were established – Allahabad Bank and Punjab National Bank. In 1899, HSBC acquired The Imperial Bank of India which had been established just four years earlier.
The early 20th century saw a number of important developments in Indian banking. In 1903, The Reserve Bank of India was established as the country’s central bank. In 1911, The Indian Banking Companies Act was enacted which brought all banks operating in India under regulatory supervision.
The 1920s saw a wave of bank nationalisations with a number of leading banks being taken over by government ownership. This trend continued even after independence with several more nationalisations taking place in 1969 and 1980.
Post Independence Period (1947-1991)
The Indian banking sector has undergone a sea of changes since India’s independence in 1947. The first bank in India, Bank of Bengal, was established in 1809. However, it was not until after the First War of Independence in 1857 that other banks started appearing in India. The period between 1920 and 1940 is considered the early phase of Indian banking. This is when the Reserve Bank of India (RBI) was established and when several large banks such as Allahabad Bank, Punjab National Bank, and Canara Bank were founded.
The nationalization of 14 major commercial banks in 1969 was a watershed moment in the history of Indian banking. It led to a significant increase in the reach of banking services across the country. In 1980, another wave of nationalization saw six more commercial banks being brought under government control. These measures helped make banking accessible to a larger section of society and also strengthened the role of public sector banks in the economy.
Since 1991, when India embarked on economic liberalization, the banking sector has undergone rapid changes. Private banks and foreign banks have been allowed to enter the market, leading to increased competition. Technology has also transformed the way banks operate, with ATM machines and online banking now commonplace features. Despite all these changes, public sector banks still dominate the industry with a market share of around 70%.
Check Out Given below list of these 14 Banks nationalised in 1969:
- Allahabad Bank
- Bank of India
- Bank of Baroda
- Bank of Maharashtra
- Central Bank of India
- Dena Bank
- Canara Bank
- Indian Overseas Bank
- Indian Bank
- Punjab National Bank
- Syndicate Bank
- Union Bank of India
- United Bank
- UCO Bank
In the year 1980, other 6 banks were nationalised
- Andhra Bank
- Corporation Bank
- New Bank of India
- Oriental Bank of Comm.
- Punjab & Sind Bank
- Vijaya Bank
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The Different Types of Banks in India
The banking sector in India has come a long way since the days of the first bank in India, which was established in 1786. The different types of banks in India can be broadly classified into two categories – public sector banks and private sector banks.
Public Sector Banks:
The public sector banks (PSBs) are owned and controlled by the Indian government. These banks play a very important role in the Indian economy and are considered to be the backbone of the banking system in India. As of March 2020, there are a total of 27 PSBs in India.
Notable PSBs in India include State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BoB), Canara Bank, Union Bank of India, etc.
Private Sector Banks:
The private sector banks (PSBs) are owned and controlled by private entities. These banks have been playing an increasingly important role in the Indian banking sector and as of March 2020, there are a total of 43 PSBs in India.
Notable PSBs in India include HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank, IndusInd Bank, Yes Bank, etc.
The Services Offered by Banks in India
Banks in India offer a range of services to their customers, including savings and checking accounts, loans, credit cards, and investment products. They also provide services such as money transfers, foreign exchange, and safe deposit box rentals. In recent years, banks have expanded their service offerings to include online and mobile banking, as well as financial planning and advisory services.
The Indian banking sector has undergone a significant evolution over the past few years. This can be attributed to a number of factors, including the liberalization of the economy, the growth of the middle class, and the increasing use of technology. As a result of these trends, banks are now offering more sophisticated products and services to meet the needs of their customers.
One of the most important services offered by banks in India is savings accounts. Savings accounts allow customers to save money for future use, while earning interest on their deposits. Banks offer different types of savings account products depending on customer needs and preferences. For example, some banks offer basic savings accounts with no frills or minimum balance requirements, while others offer more sophisticated account packages that come with higher interest rates and additional perks such as freebies or access to exclusive events.
Another important service offered by banks in India is loans. Loans can be used for a variety of purposes such as funding education, starting a business, or buying a home. Banks offer both personal and business loans to their customers. The terms and conditions of these loans vary depending on the bank and
The Early Days of Banking in India
The early days of banking in India can be traced back to the 18th century. The first bank in India was the Bank of Bengal, which was established in 1784. This was followed by the establishment of the Bank of Bombay in 1840 and the Bank of Madras in 1843. These three banks were known as the Presidency Banks.
The Presidency Banks were followed by a number of other banks such as the Allahabad Bank (1865), Punjab National Bank (1894) andCanara Bank (1906). Indian banking sector underwent a major transformation after the nationalisation of 14 major commercial banks in 1969. This led to an increase in the number of branches as well as ATMs across India.
In recent years, there has been a rapid growth in the number of private banks and foreign banks operating in India. Some of the leading private banks include HDFC Bank, ICICI Bank and Axis Bank. Foreign banks such as Citibank, HSBC and Standard Chartered have also made their presence felt in the Indian banking landscape.
The Future of Banking in India
In the next decade, we expect India’s banking sector to grow in three ways: first, by expanding its customer base; second, by increasing its branch network; and third, by providing more innovative products and services.
To tap into new customer segments, banks will need to focus on financial inclusion initiatives such as Jan Dhan Yojana and Pradhan Mantri Mudra Yojana. They will also need to develop innovative products and services for specific customer segments such as women, rural populations, and small businesses.
To expand its branch network, banks will need to invest in technology such as automated teller machines (ATMs) and point-of-sale (POS) terminals. They will also need to partner with local players in order to reach remote locations.
Finally, banks will need to provide more innovative products and services in order to stay ahead of the competition. This could include mobile banking, online banking, and other digital services.
Frequently Asked Questions Banking in India
1. What is banking?
Banking is defined as the act of storing money or valuables in a bank account. Banks are financial institutions that provide loans and savings accounts. Banks are regulated by central banks and finance ministries.
2. How does banking work?
Banks have branches all over the country. You go to a branch and open an account. You deposit money in the bank. You get a debit card that you use at ATMs to withdraw cash. You can also transfer money between your accounts using the ATM network.
3. Why do we need banking?
We need banking because we want to store our money safely. We don’t want to carry around bags full of cash. If someone steals our bag, they could steal our money. We also need banking because we need to pay bills. We need to make payments to suppliers, rent, taxes, etc.
4. Who regulates banking?
The Reserve Bank of India (RBI) is responsible for regulating the banking industry. RBI sets interest rates, supervises the activities of commercial banks, and issues currency.
5. What is the difference between a nationalized bank and a private bank?
A nationalized bank is owned by the government. A private bank is owned by individuals or companies. Nationalized banks offer lower interest rates than private banks.
6. What is the difference among different types of accounts?
Savings Account – This type of account is similar to a checking account. You can save money in this account. Savings accounts are insured by the Deposit Insurance Corporation of India (DIC).
Current Account – This type of accounts is used to keep track of daily transactions. You can use this type of account to pay utility bills, buy things online, and send money home. Current accounts are not insured by DIC.
Time Deposits – These are short-term deposits. You can put money in these accounts and earn higher interest rates. Time deposits are insured by the Government of India.
