Banking
Banking can be defined as the business
activity of accepting and safeguarding money
owned by other individuals and entities and
then lending out this money in order to earn a
profit.
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History of Banking in India: Pre-Independence to Liberalization, Slides of Banking and Finance
An overview of the evolution of the banking system in India, from the establishment of the first banks in the late 18th century to the liberalization of the sector in the 1990s. the pre-independence phase, which saw the foundation of several early banks, and the post-independence period, which was marked by nationalization and liberalization. The document also discusses the different types of banks in India, including commercial banks, public sector banks, private sector banks, foreign banks, and regional rural banks.
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Banking
Banking can be defined as the business
activity of accepting and safeguarding money
owned by other individuals and entities and
then lending out this money in order to earn a
profit.
History of Banking
The Banking system in India can be categorized in
two phases
- Pre-Independence Phase
- The post-Independence period may further be
divided into three phases-
- Pre-nationalisation Period
- Post nationalization Period
- Liberalization Period
- The first Indian-owned Allahabad Bank was set up in 1865 in
Allahabad.
- In 1894, the Punjab National Bank was established in 1894.
- The Bank of India founded in 1906 in Mumbai.
- Many more commercial banks such as Canara Bank, Indian Bank,
Central Bank of India, Bank of Baroda and Bank of Mysore were
established between 1906 and 1913 under Indian ownership.
- The central Bank of India, RBI establish in 1935 on the
recommendation of Hilton-Young Commission.
Post- Independence Phase (1947 to till)
- At the time independence, the entire Banking sector
was under private ownership. The rural population of
the country had to dependent on small money lenders
for their requirements. To solve these issues and better
development of the economy the Government of India
nationalized the Reserve Bank of India in 1949.
- In 1955 the Imperial Bank of India was
nationalized and named the State Bank of India.
- The Banking Regulation Act enacted in 1949.
Liberalization Phase (1990 to till)
- In order to improve financial stability and profitability of Public Sector Banks, the Government of India set up a committee under the chairmanship of Shri. M. Narasimham. The committee recommended several measures to reform banking system in the country.
- The major trust of the recommendations was to make banks competitive and strong and conducive to the stability of the financial system.
- Foreign banks would be allowed to open offices in India either as branches or as subsidiaries.
- In order to make banks more competitive, the committee suggested that public sector banks and private sector banks should be treated equally by the Government and RBI.
- It was emphasized that banks should be encouraged to abandon the conservative and traditional system of banking and adopt progressive function such as merchant banking and underwriting, retail banking, etc.
- Now, foreign banks and Indian banks permitted to set up joint ventures in these and other newer forms of financial services.
- 10 Privates players got a license from the RBI to entry in the Banking sector. These were Global Trust Bank, ICICI Bank, HDFC Bank, Axis Bank, Bank of Punjab, Induced Bank, Centurion Bank, IDBI Bank, Times Bank and Development Credit Bank.
COMMERCIAL BANKS
They are the banks mainly deal with commercial
banking operations like acceptance of deposits and
granting loans to the public. They are mainly classified
into four:-
Scheduled banks
Commercial banks
Co-operative banks
2. PRIVATE SECTOR BANKS
These banks are owned and controlled by private
institutions or individuals and not by the
government.
Examples:
- South Indian Bank
- ICICI
- HDFC
- Axis bank etc.
3. FOREIGN BANKS
These banks are formed and registered in foreign countries and have their head office in foreign country.as far as India is concerned, any bank registered outside India and have a branch in India is a foreign bank.
Examples
- Yes Bank
- Citi Bank
- HSBC
B) CO-OPERATIVE BANKS
These are banks where co-operative societies that are formed at a state or district level have a share of more than 51%. these are primarily set-up for the purpose of services the farming community or to aid in land or infrastructure development at the state or district level.
URBAN CO-OPERATIVE BANKS
The term Urban Co-operative Banks (UCBs), though not formally defined, refers to primary cooperative banks located in urban and semi-urban areas. These banks, till 1996, were allowed to lend money only for non-agricultural purposes.. They essentially lent to small borrowers and businesses
2. STATE CO-OPERATIVE
BANKS
State co-operative banks are the apex co-operative
institution in a state. They are federations of district co-
operative banks, and they monitor the activities of all co-
operative banks in the state.
Examples:-
- Kerala state co-operative bank
- Orissa state co-operative bank
- West Bengal state co-operative bank
RBI
- The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank Of India Act 1934.
- The Central Office of the Reserve Bank was initially established in Calcutta but was permanently moved to Mumbai in 1937. The Central Office is where the Governor sits and where policies are formulated.
- Though originally privately owned, since nationalisation in 1949, the Reserve Bank is fully owned by the Government of India.
- It was set up on the recommendations of the “Hilton
- Young Commission”.
- It was started as Share-Holders Bank with a paid up capital of 5 crores.
- Initially it was located in Kolkata.
- Initially it was Privately Owned