History and Evolution of Banks

History and evolution
of banks
Presented by:
Preeti upadhyay
Priyanka dubey
Priyanka mathur
Ritika parmar
Neha singh
Introduction
 Without a sound and effective banking system
in India it cannot have a healthy economy. The
banking system of India should not only be
hassle free but it should be able to meet new
challenges posed by the technology and any
other external and internal factors.
 For the past three decades India's banking
system has several outstanding achievements
to its credit. The most striking is its extensive
reach. It is no longer confined to only
metropolitans or cosmopolitans in India. In
fact, Indian banking system has reached even
to the remote corners of the country. This is
one of the main reason of India's growth
process.
History Of Banking In India
 The first bank in India, though conservative, was established
in 1786. From 1786 till today, the journey of Indian Banking
System can be segregated into three distinct phases. They are
as mentioned below:
 Early phase from 1786 to 1969 of Indian Banks

Nationalisation of Indian Banks and up to 1991 prior to Indian
banking sector Reforms.
New phase of Indian Banking System with the advent of
Indian Financial & Banking Sector Reforms after 1991.
Phase I
 Phase I
The General Bank of India was set up in the year 1786. Next came Bank of
Hindustan and Bengal Bank. The East India Company established Bank of
Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as
independent units and called it Presidency Banks. These three banks were
amalgamated in 1920 and Imperial Bank of India was established which
started as private shareholders banks, mostly Europeans shareholders.
In 1865 Allahabad Bank was established and first time exclusively by
Indians, Punjab National Bank Ltd. was set up in 1894 with headquarters at
Lahore. Between 1906 and 1913, Bank of India, Central Bank of India,
Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set
up. Reserve Bank of India came in 1935.
Phase I
 During the first phase the growth was very slow and banks also
experienced periodic failures between 1913 and 1948. There
were approximately 1100 banks, mostly small. To streamline the
functioning and activities of commercial banks, the Government
of India came up with The Banking Companies Act, 1949 which
was later changed to Banking Regulation Act 1949 as per
amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of
India was vested with extensive powers for the supervision of
banking in india as the Central Banking Authority.
During those days public has lesser confidence in the banks. As
an aftermath deposit mobilisation was slow. Abreast of it the
savings bank facility provided by the Postal department was
comparatively safer. Moreover, funds were largely given to
traders
Phase II
 Phase II
Government took major steps in this Indian Banking Sector Reform after
independence. In 1955, it nationalised Imperial Bank of India with extensive
banking facilities on a large scale specially in rural and semi-urban areas. It formed
State Bank of india to act as the principal agent of RBI and to handle banking
transactions of the Union and State Governments all over the country.
Seven banks forming subsidiary of State Bank of India was nationalised in 1960 on
19th July, 1969, major process of nationalisation was carried out. It was the effort
of the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial
banks in the country was nationalised.
Second phase of nationalisation Indian Banking Sector Reform was carried out in
1980 with seven more banks. This step brought 80% of the banking segment in
India under Government ownership.

The following are the steps taken by the Government of India to Regulate
Banking Institutions in the Country:
1949 : Enactment of Banking Regulation Act.

1955 : Nationalisation of State Bank of India.
1959 : Nationalisation of SBI subsidiaries.
1961 : Insurance cover extended to deposits.
1969 : Nationalisation of 14 major banks.
1971 : Creation of credit guarantee corporation.
1975 : Creation of regional rural banks.
1980 : Nationalisation of seven banks with deposits over 200 crore.
After the nationalisation of banks, the branches of the public sector bank
India rose to approximately 800% in deposits and advances took a huge
jump by 11,000%.
Phase III
 Phase III
This phase has introduced many more products and facilities in
the banking sector in its reforms measure. In 1991, under the
chairmanship of M Narasimham, a committee was set up by his
name which worked for the liberalisation of banking practices.
The country is flooded with foreign banks and their ATM
stations. Efforts are being put to give a satisfactory service to
customers. Phone banking and net banking is introduced. The
entire system became more convenient and swift. Time is given
more importance than money.
 The financial system of India has shown a
great deal of resilience. It is sheltered from any
crisis triggered by any external
macroeconomics shock as other East Asian
Countries suffered. This is all due to a flexible
exchange rate regime, the foreign reserves are
high, the capital account is not yet fully
convertible, and banks and their customers
have limited foreign exchange exposure.

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History and evolution

 Early phase from 1786 to 1969 of Indian Banks

1949 : Enactment of Banking Regulation Act.

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