BANKING AWARENESS : History of Banking in India

BANKING AWARENESS :

History of Banking in India

From the ancient times in India, an indigenous banking system has prevailed. The businessmen called Shroffs, Seths, Sahukars, Mahajans, Chettis etc. had been carrying on the business of banking since ancient times. These indigenous bankers included very small money lenders to shroffs with huge businesses, who carried on the large and specialized business even greater than the business of banks.

Banking In British Era

The origin of western type commercial Banking in India dates back to the 18th century. Bank of Hinduthan is the first bank in India which started at 1770. This bank is liquidated in 1829-32.

After this many banks were started and many banks failed. Some banks started at that time are given below.

Post Independence

• The Reserve Bank of India, India’s central banking authority, was established in April 1935, but was nationalised on 1 January 1949 under the terms of the Reserve Bank of India (Transfer to Public Ownership) Act, 1948.
• In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of India (RBI) “to regulate, control, and inspect the banks in India”.
• The Banking Regulation Act also provided that no new bank or branch of an existing bank could be opened without a license from the RBI, and no two banks could have common directors.

Nationalization of Banks

Despite the provisions, control and regulations of the Reserve Bank of India, banks in India except the State Bank of India (SBI), continued to be owned and operated by private persons. By the 1960s, the Indian banking industry had become an important tool to facilitate the development of the Indian economy. At the same time, it had emerged as a large employer, and a debate had ensued about the nationalization of the banking industry.

Indira Gandhi, the then Prime Minister of India, expressed the intention of the Government of India in the annual conference of the All India Congress Meeting in a paper entitled “Stray thoughts on Bank Nationalization”. The meeting received the paper with enthusiasm.

Thereafter, her move was swift and sudden. The Government of India issued an ordinance (‘Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, 1969’) and nationalised the 14 largest commercial banks with effect from the midnight of 19 July 1969. These banks contained 85 percent of bank deposits in the country.

Jayaprakash Narayan, a national leader of India, described the step as a “masterstroke of political sagacity.” Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received the presidential approval on 9 August 1969.

A second dose of nationalisation of 6 more commercial banks followed in 1980. The stated reason for the nationalisation was to give the government more control of credit delivery. With the second dose of nationalisation, the Government of India controlled around 91% of the banking business of India.

Later on, in the year 1993, the government merged New Bank of India with Punjab National Bank. It was the only merger between nationalised banks and resulted in the reduction of the number of nationalised banks from 20 to 19.

Liberalization after 1990’s

In the early 1990s, the then government embarked on a policy of liberalization, licensing a small number of private banks. These came to be known as New Generation tech-savvy banks, and included Global Trust Bank (the first of such new generation banks to be set up), which later amalgamated with Oriental Bank of Commerce, UTI Bank (since renamed Axis Bank), ICICI Bank and HDFC Bank.

This move, along with the rapid growth in the economy of India, revitalised the banking sector in India, which has seen rapid growth with strong contribution from all the three sectors of banks, namely, government banks, private banks and foreign banks.

History of State bank of India

The largest bank, and the oldest still in existence, is the State Bank of India. It originated as the Bank of Calcutta in June 1806. In 1809, it was renamed as the Bank of Bengal. This was one of the three banks funded by a presidency government, the other two were the Bank of Bombay and the Bank of Madras. The three banks were merged in 1921 to form the Imperial Bank of India, which upon India’s independence, became the State Bank of India in 1955.

After this, SBI has acquired some local banks with its control. These are called as subsidiaries of SBI. They are

• State Bank of Bikaner and Jaipur (SBBJ)
• State Bank of Hyderabad (SBH)
• State Bank of Mysore (SBM)
• State Bank of Patiala (SBP)
• State Bank of Travancore (SBT)

Current banking In India

The Indian banking sector is broadly classified into scheduled banks and non-scheduled banks. All banks which are included in the Second Schedule to the Reserve Bank of India Act, 1934 are Scheduled Banks. These banks comprise Scheduled Commercial Banks and Scheduled Co-operative Banks.

Scheduled Co-operative Banks consist of Scheduled State Co-operative Banks and Scheduled Urban Cooperative Banks. Scheduled Commercial Banks in India are categorized into five different groups according to their ownership and/or nature of operation:

• State Bank of India and its Associates
• Nationalised Banks
• Private Sector Banks
• Foreign Banks
• Regional Rural Banks.

Some GK Questions on Banking

1. First bank established in India : Bank of Hindustan in 1770
2. Second bank : General Bank of India, 1786
3. Oldest bank in India originated in the Bank of Calcutta in June 1806 which was still in existence  : State Bank of India
4. First Indian bank got ISO : Canara Bank
5. First India bank started solely with Indian capital investment is : PNB (Punjab National Bank)
6. Founder of Punjab National Bank is : Lala Lajpat Rai
7. Reserve bank of India (RBI) was instituted in : 1935
8. First governor of RBI : Mr.Osborne Smith
9. First Indian Governor of RBI : Mr. C D Deshmukh
10. First bank to introduce savings account in India : Presidency Bank in 1833
11. First bank to introduce cheque system in India : Bengal Bank in 1833
12. First bank to introduce internet banking : ICICI bank
13. First bank to introduce mutual fund : State Bank of India
14. First bank to introduce credit card in India : Central Bank of India
15. Which cards are known as plastic money  : Credit Cards.
16. Open market operations are carried out by  : RBI
17. Capital market regulator is  : SEBI
18. Largest Commercial bank in India  : State Bank of India
19. The International Bank for Reconstruction and Development (IBRD) is known as : World Bank
20. India’s First Financial Archive has been set up at  : Kolkata
21. CRR, SLR, Repo Rate, Reverse Repo rate are decide by : RBI
22. Savings banks interest rates, fixed deposit interest rates, Loan Rates etc. are decided by : Individual banks
23. The bank which has launched Mobile Bank Accounts in association with Vodafone’s m paisa  : HDFC Bank
24. Minimum money transfer limit through RTGS : 2 Lakhs
25. Maximum money transfer limit through RTGS : No Limit
26. Minimum & Maximum money transfer limit through NEFT : No Limit
27. NABARD was established in  : July, 1982
28. Largest Public sector bank in India  : SBI
29. Largest Private sector bank in India  : ICICI Bank
30. Largest Foreign bank in India  : Standard Chartered Bank
31. First Indian bank to open branch outside India i.e. London in 1946 : Bank of India
32. First RRB named Prathama Grameen Bank was started by : Syndicate Bank
33. First Bank to introduce ATM in India : HSBC in1987, Mumbai
34. Bank has the maximum number of overseas branches: Bank of Baroda
35. ___holds the second position with maximum number of overseas branches: SBI
36. Premium credit cards exclusively for women launched recently by  : HDFC bank
37. Private Sector Bank that recently launched a product of Personal loan called “SWIFT”  : HDFC
38. The bank which approved loan of $500mn to help India improve Rail services  : Asian Development Bank
39. First bank established in India : Bank of Hindustan in 1770
40. Second bank : General Bank of India, 1786
41. Oldest bank in India originated in the Bank of Calcutta in June 1806 which was still in existence  : State Bank of India
42. First Indian bank got ISO : Canara Bank
43. First India bank started solely with Indian capital investment is : PNB (Punjab National Bank)
44. Founder of Punjab National Bank is : Lala Lajpat Rai
45. Reserve bank of India (RBI) was instituted in : 1935
46. First governor of RBI : Mr.Osborne Smith
47. First Indian Governor of RBI : Mr. C D Deshmukh
48. First bank to introduce savings account in India : Presidency Bank in 1833
49. First bank to introduce cheque system in India : Bengal Bank in 1833
50. First bank to introduce internet banking : ICICI bank
51. First bank to introduce mutual fund : State Bank of India
52. First bank to introduce credit card in India : Central Bank of India
53. Which cards are known as plastic money  : Credit Cards.
54. Open market operations are carried out by  : RBI
55. Capital market regulator is  : SEBI
56. Largest Commercial bank in India  : State Bank of India
57. The International Bank for Reconstruction and Development (IBRD) is known as : World Bank
58. India’s First Financial Archive has been set up at  : Kolkata
59. CRR, SLR, Repo Rate, Reverse Repo rate are decide by : RBI
60. Savings banks interest rates, fixed deposit interest rates, Loan Rates etc. are decided by : Individual banks
61. The bank which has launched Mobile Bank Accounts in association with Vodafone’s m paisa  : HDFC Bank
62. Minimum money transfer limit through RTGS : 2 Lakhs
63. Maximum money transfer limit through RTGS : No Limit
64. Minimum & Maximum money transfer limit through NEFT : No Limit
65. NABARD was established in  : July, 1982
66. Largest Public sector bank in India  : SBI
67. Largest Private sector bank in India  : ICICI Bank
68. Largest Foreign bank in India  : Standard Chartered Bank
69. First Indian bank to open branch outside India i.e. London in 1946 : Bank of India
70. First RRB named Prathama Grameen Bank was started by : Syndicate Bank
71. First Bank to introduce ATM in India : HSBC in1987, Mumbai
72. Bank has the maximum number of overseas branches: Bank of Baroda
73. ___holds the second position with maximum number of overseas branches: SBI
74. Premium credit cards exclusively for women launched recently by  : HDFC bank