Evolution of Banking In India

Evolution of Banking In India – Best No.1 Study Notes

Looking for information on the evolution of banking in India? Check out our comprehensive notes on the history and development of banking in India, including key milestones, major players, and the impact of modern technology. Gain a deeper understanding of how the banking sector has transformed over the years and its role in shaping the Indian economy.

Evolution of Banking In India
Evolution of Banking In India

Evolution of Banking In India

A. Father of Banking In India

In India, moneylenders and loan sharks are known as the ‘fathers of banking in India’.

1. Lender

“A person or a private institution which makes loans on its own stock, but does not usually accept deposits or deal in dowry, is called a moneylender.” – Dr. L. C. Jain

“Those whose principal business is not banking business, but lending or money-lending, are called money-lenders.” – The Indian Central Banking Committee

2. Sarafi Pedhiwale

“A person or institution which lends money, accepts deposits and deals in dowry is called Sarafi Pedhiwale.” – Dr. L. C. Jain

“Sarafi Pedhiwala includes any person or institution accepting deposits, dealing in dowry or granting loans other than Imperial Bank of India, Exchange Banks, Joint Capital Banks and Co-operative Credit Societies” – Central Banking Inquiry Committee

B) Evolution of Modern Banking in India

A) Evolution of Modern Banking Business From Pre-Independence Period :

1. Agency Houses

British introduced modern banking system in India. After the establishment of the East India Company in the seventeenth century, the money required for this company was initially provided by Indian moneylenders and moneylenders. But after some time this supply stopped and the servants of the East India Company established agency houses as a supplementary business. These agency houses began providing capital to the East India Company, lending to the food trade, issuing their own paper currency, and accepting deposits.

2. Bank of India

At the initiative of the British people In 1770, Bank of Hindustan was established in Kolkata. This is the first bank in the country. In the year 1832, this bank was also liquidated due to the closure of the agency house. Most of the transactions of this bank are Alexander & Co. These agencies were running with House.

3. Presidency Bank

These banks were established to provide loans in their respective regions or areas of operation. Bank of Kolkata was established in 1806. Also in the year 1809 this bank was named as ‘Bank of Bengal’. The government allowed this bank to print currency notes in 1823. After this, in 1840, the second bank named ‘Bank of Bombay’ was established and the third bank was established in 1843 by the name of ‘Bank of Madras’.

4. Imperial Bank

According to the Act of 1920, all the three Presidency Banks (Bengal, Bombay, and Madras) were merged to form ‘The Bank Imperial of India’.

5. Reserve Bank of India

In 1920, the name Imperial Bank was announced as the central bank of the country, but it did not happen. According to the Act of 1934, Reserve Bank of India was established on 1 April 1935 as the central bank of India. In 1926, the Hilton Young Commission proposed the establishment of this bank: but this proposal was not accepted. This bank was nationalized on January 1, 1949. Later some parts of the Reserve Bank were separated and their Shikhar Banks were created. For example:- Exim Bank, UTI, IDBI. etc.

NABARD was established on 12 July 1982.

6. Private Merchants and Joint Capital Banks

Companies Act was passed in India in 1860. In the same year, the first commercial joint venture banking company, Bank of Allahabad, was established. In 1860, the number of banks increased. Because this year the principle of limited liability came into force. Alliance Bank of Simala was established in 1873, Oudh Commercial Bank in 1881, Punjab National Bank in 1884.

7. Cooperative Banks

In 1882, the Nicholson Committee suggested to the Government of Madras that agricultural co-operative banks should be established in India.

b) Evolution of modern banking business in the post-independence era:

1. Banking Regulation Act

During 1947-48, due to inflation and war-like conditions, deposits in commercial banks increased. The Banking Regulation Act was passed in 1949 to regulate all the activities of these commercial banks. According to this Act, the Reserve Bank is empowered to establish new banks, control the management of commercial banks, workmen, employees, and issue instructions to commercial banks, change in cash reserves, reserve funds, capital, and penalize banks for illegal conduct. Drawing, etc. Additional car received.

2. Nationalization of commercial banks

Commercial banks were busy increasing their profits more and more. This was of no use to the rural areas and the country’s economy. So On July 1, 1969, the major commercial banks were nationalized and their capital became owned by the central government.

3. Provincial Gramin Banks

In the year 1972, the Banking Commission suggested the establishment of Grameen Bank to provide facilities to the economically weaker sections. Regional Rural Banks were established on 2nd October 1975.

Frequently Asked Questions (FAQ)

Q: What is the history of banking in India?

A: Banking in India dates back to the ancient times, when moneylenders used to provide credit and financial services. The modern banking system in India was established during the British colonial rule, with the formation of the Bank of Bengal in 1806.

Q: What were the key milestones in the development of banking in India?

A: Some of the key milestones in the development of banking in India include the establishment of the Reserve Bank of India in 1935, nationalization of major banks in 1969 and 1980, and the introduction of liberalization and globalization policies in the 1990s.

Q: What is the current state of the banking sector in India?

A: The banking sector in India is one of the largest and most diversified in the world, with a mix of public sector, private sector, and foreign banks operating in the country. The sector has undergone significant transformation in recent years, with the adoption of modern technology and the emergence of new players such as fintech companies.

Q: What is the impact of technology on the banking sector in India?

A: Technology has had a profound impact on the banking sector in India, leading to the emergence of new business models and service offerings. The adoption of digital banking solutions has made banking more convenient and accessible for customers, while also improving operational efficiency and reducing costs for banks.

Q: What are the challenges faced by the banking sector in India?

A: The banking sector in India faces a range of challenges, including increasing competition, changing customer preferences, regulatory compliance, and rising non-performing assets. However, the sector is also adapting to these challenges by embracing innovation and leveraging new technologies.

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