History of Banking In India: Indian Banking History, see important factors related to banking

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History of Banking In India

Banking has been an important part of our lives for a very long time and this sector makes a major contribution to our economy. The history of banking in India has gone through many phases, reforms and has been continuously evolving since then. Candidates preparing for banking exams should be aware of the questions asked from the General Awareness section.

History of Banking in India Introduction

According to the Banking Companies Act 1949, banking is defined as: which accepts deposits from the public for the purpose of loan or investment, the official bearer of which accepts payment and is credited with the receipt by cheque, draft, order or other can be extracted in this manner.

History of Banking in India: Stages of Evolution

Banking has been prevalent in India since the Vedic period. But here, we can classify the history of banking in India into 3 phases:

  1. Pre-independence phase – before 1947
  2. Banking History Phase II – 1947 to 1991
  3. Banking History Phase III – 1991 and onwards

History Of Banking In India: Pre-Independence Stage

The history of banking in India during the pre-independence phase is discussed below highlighting important points.

  • More than 600 banks existed at that stage.
  • The first bank of India was established in 1770 and thus the banking system in India began with the foundation of the Bank of Hindustan.
  • During this phase the top three banks merged – Bank of Bengal, Bank of Bombay and Bank of Madras and came into existence as Imperial Bank, which was later taken over by SBI in 1955.
  • Some other banks were also established during this period such as Allahabad Bank 1865, Punjab National Bank 1894, Bank of India 1906, Bank of Baroda 1908, Central Bank of India 1911.

History Of Banking In India: From 1947 to 1991

Here the major points of the history of banking in India for the period 1947 to 1991 are mentioned.

  • The bank was nationalized during this period.
  • During the same period, the Central Bank of India was also nationalized on 1 January 1949.
  • Regional Rural Banks were formed on 2 October 1975 on the recommendation of the Narasimha Committee.

History of Banking In India: Beyond 1991

Here, we have mentioned some important points in the history of banking in India after 1991.

  • Liberalized economic policies were made in the year 1991 as a sign of progress for the banks.
  • This phase, characterized by a period of expansion, consolidation, and growth in many ways, was known as the “Phase of Prosperity.”
    • RBI also gave licenses to 10 private entities which include – ICICIAxis Bank, HDFC, DCBIndusInd Bank

History Of Banking In India: Categories

At present, banks in India can be classified as Scheduled and Non-Scheduled Banks:

Scheduled Banks

Scheduled banks in India are those banks which constitute the banks which are included in the Second Schedule of the Reserve Bank of India (RBI) Act, 1934. It basically includes commercial banks and co-operative banks. Commercial banks majorly include scheduled and non-scheduled commercial banks which are regulated by the Banking Regulation Act 1949.

Commercial banks operate mainly on 'Profit Basis' and are engaged in the business of accepting deposits for the purpose of advances/loans. We can classify scheduled commercial banks into four types:

  • Public Sector Banks: These are institutions that are owned by the government. Has more than 51% stake in the capital.
  • Private Sector Banks: Private banks are those institutions which are owned by private individuals/institutions and are registered as limited companies under the Companies Act 1956.
  • Regional Rural Bank (RRB): These institutions are completely under the government and work for the betterment of the rural sector of the society.

Non-Scheduled Banks

Non-scheduled bank as defined in clause (C) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), which is not a scheduled bank. The Reserve Bank of India is the only central bank of India and all banks in India are required to follow the guidelines issued by the RBI.

History Of Banking In India: First In Indian Banking System

  • First bank in India was Bank of Hindustan (1770)
  • First Bank managed by Indians was Oudh Commercial Bank
  • First Bank with Indian Capital was Punjab National Bank (Founder of the Bank is Lala Lajpat Rai)
  • First Foreign Bank in India is HSBC
  • First bank to get ISO certificate is Canara Bank
  • First Indian bank outside India is Bank of India
  • First Bank to introduce ATM is HSBC (1987, Mumbai)
  • First Bank to have a joint-stock public bank (Oldest) is Allahabad Bank
  • First Universal bank is ICICI (Industrial Credit and Investment Corporation of India)
  • First bank to introduce saving account is Presidency Bank (1833)
  • First Bank to Introduce Cheque system is  Bengal Bank (1833)
  • First bank to give internet banking facility is ICICI
  • First bank to sell mutual funds is  State Bank of India
  • First bank to issue credit cards is Central Bank of India
  • First Digital Bank  is Digibank
  • First Rural Regional Bank (Grameen Bank) is  Prathama Bank (sponsored by Syndicate Bank)
  • First bank to get ‘in principle’ banking license is  IDFC and Bandhan Bank
  • First Bank to introduce merchant banking in India is  Grind lays bank
  • First bank to introduce blockchain technology is  ICICI
  • First bank to introduce voice biometric is Citi Bank
  • First bank to introduce robot in banking service is HDFC

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