History of Banking in India
The History of Banking in India is as old as Vedic Civilization. For example, in Vedic age the loan deeds called rnapatra or rnalekhya were prevalent. Interest rates as well as usury (सूदखोरी ) was prevalent in Vedic India.
The Vedic word Kusidin refers to an usurer. Manusmriti condemns usury but calls it an acceptable means of acquiring wealth. Existence of institution money lending proved by the fact that Manusmriti fixes minimum and maximum rates of interest and considers money lending above a certain rate as grave sin. However, it fixes different ceiling rates for different caste. For example, the rate of interest for Brahmins was 24% while it was 36%, 48% and 60% for Kshatriyas, Vaishyas and Shudras.
Akin to the Vedic era, the Buddhist, Mauryan and Mughal periods are also known for various types of such instruments. The Arthashastra of Kautilya mentions presence of bankers during Maurya era. There were instruments in Maurya Era known as “Adesha” which are equivalent to Bill of exchange of current times. There are plenty of references available in the ancient Indian literature regarding an indigenous banking system that financed the trade and commerce in the country. 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.
Origin of Modern Banking Industry in India
First Bank of India
The first bank of India is Bank of Hindustan established in 1770. This bank was established at Calcutta under European management. It was liquidated in 1830-32.
Presidency Banks
From 1612 onwards, British East India Company had set up various factories or trading posts in India with the permission of the local Mughal emperors. In this process, they had established three presidency towns viz. Madras in 1640, Bombay in 1687 and Bengal Presidency in 1690. East India Company’s headquarters moved from Surat to Bombay (Mumbai) in 1687. Three Presidency banks were set up under charters from the British East India Company- Bank of Calcutta, Bank of Bombay and the Bank of Madras. The dates of their establishment were as follows:
- 2 June 1806:Bank of Calcutta was established in 1806; it was renamed in 1809 as Bank of Bengal
- 15 April 1840: Bank of Bombay established
- 1 July 1843: Bank of Madras established
These worked as quasi central banks in India for many years. Since Calcutta was the most active trading port in India, mainly due to the trade of the British Empire; it became a banking center.
Imperial Bank of India
In 1921, the presidency banks viz. Bank of Bengal, Bank of Bombay and Bank of Madras were amalgamated to form Imperial Bank of India. It was a private entity till that time. In 1955, this Imperial Bank of India was nationalized and renamed as State Bank of India. Thus, State bank of India is oldest Bank of India among the banks that exist today.
Oldest Joint Stock Bank of India
A bank that has multiple shareholders is called joint-stock bank. Oldest Joint Stock bank of India was Bank of Upper India that was established in 1863. But this bank failed in 1913. India’s Oldest Joint Stock Bank which is still working is Allahabad Bank. It is also known as India’s oldest public sector bank. It was established in 1865.
First banks owned / managed by Indians
The first Bank with Limited Liability to be managed by Indian Board was Oudh Commercial Bank. It was established in 1881 at Faizabad. This bank failed in 1958. The first bank purely managed by Indians was Punjab National Bank, established in Lahore in 1895. The Punjab national Bank has not only survived till date but also is one of the largest banks in India. However, the first Indian commercial bank which was wholly owned and managed by Indians was Central Bank of India which was established in 1911. So, Central Bank of India is called India’s First Truly Swadeshi bank. Its founder was Sir Sorabji Pochkhanawala and its first chairman was Sir Pherozeshah Mehta.
First bank to open a branch at foreign soil
Bank of India was the first Indian bank to open a branch outside India in London in 1946 and the first to open a branch in continental Europe at Paris in 1974. Bank of India was founded in September 1906 as a private entity and was nationalized in July 1969. Since the logo of this Bank is a star, its head office in Mumbai is located in Star House, Bandra East, Mumbai.
Important Dates in Banking History of India
Year | Event |
---|---|
1770 | Bank of Hindostan, First bank of India was established at Calcutta under European Management. |
1786 | General Bank of India (First bank established in India) |
1790 | Bank Of Hindustan which lasted until. 1832. |
1806 | On June 2, 1806, Bank of Calcutta was established. This was first presidency bank and was later renamed as Bank of Bengal in 1809. |
1839 | Union Bank |
1840 | On April 15, 1840, Bank of Bombay was established as second presidency bank. |
1843 | On July 1, 1843, Bank of Madras established as third presidency bank. |
1861 | Paper Currency Act was enacted by British Government. |
1863 | Oldest Joint Stock bank of India named Bank of Upper India was established. |
1865 | Allahabad Bank was established. |
1881 | Oudh Commercial Bank, the first Bank of India with Limited Liability to be managed by Indian Board was established at Faizabad |
1894 | On 19 May 1894, Punjab National Bank was established at Lahore. It was first bank purely managed by Indians. Its founders were Dyal Singh Majithia and Lala Lajpat Rai. |
1895 | Punjab National Bank In Lahore |
1904 | City Union Bank |
1906 | Bank of India |
1906 | Corporation Bank |
1906 | On July 1, 1906, the Canara Hindu Permanent Fund was established. It was renamed as Canara Bank in 1910. |
1907 | On 15 August 1907, Indian Bank was established. |
1908 | Bank of Baroda was established. |
1911 | On 21 December 1911, Central Bank of India, first Indian commercial bank which was wholly owned and managed by Indians, was established. It was called First Truly Swadeshi bank |
1916 | Karur Vysya Bank established. |
1919 | Union Bank of India on 11 Novermber 1919. |
1920 | Catholic Syrian Bank |
1921 | Three presidency banks viz. Bank of Calcutta, Bank of Bombay and Bank of Madras amalgamated to form Imperial Bank of India |
1921 | Tamilnad Mercantile Bank Limited |
1923 | Andhra Bank |
1924 | Karnataka Bank Limited |
1925 | Syndicate Bank |
1926 | Lakshmi Vilas Bank Limited |
1927 | Dhanlaxmi Bank Ltd |
1929 | South Indian Bank Limited |
1931 | Vijaya Bank |
1934 | RBI Act was passed. |
1935 | 1st April 1935, Reserve bank of India commended operation. |
1935 | Bank of Maharashtra established |
1937 | Indian Overseas Bank established |
1938 | Jammu & Kashmir Bank; Dena Bank established. |
1943 | Oriental Bank of Commerce; UCO Bank, United Bank of India established. |
1945 | Federal Bank Limited |
1949 | Nationalization of Reserve Bank of India in January, 1949. |
1949 | Enactment of Banking Regulation Act |
1954 | Nainital Bank Limited established |
1955 | Industrial Credit and Investment Corporation of India (ICICI) established in 1955 as public limited company under Indian Company Act, for developing medium and small industries of private sector. It was parent of current ICICI Bank. |
1955 | Nationalization of Imperial Bank of India and renamed as State Bank of India (on recommendations of A.D. Gorwala Committee) |
1959 | Nationalization of SBI Subsidiaries |
1964 | Industrial Development Bank of India (IDBI) was established on 1 July 1964 under an Act of Parliament as a wholly owned subsidiary of the Reserve Bank of India. |
1969 | Nationalization of 14 major Banks on 19 July 1969. |
1971 | Creation of Credit Guarantee Corporation |
1975 | Creation of Regional Rural Banks |
1980 | Nationalization of 6 more banks thus making number of India’s Nationalized banks 14+6=20 excluding SBI and its subsidiaries. |
1982 | National Bank for Agriculture and Rural Development (NABARD) established on July 12, 1982. |
1985 | Kotak Mahindra Bank established |
1993 | On 4 September, 1993, New Bank of India was merged with Punjab National Bank. Thus, the nationalized banks number stood 19 excluding SBI and its associates. |
1994 | UTI Bank (Now Axis Bank) and HDFC banks established. |
1994 | ICICI Bank established and parent company Industrial Credit and Investment Corporation of India merged into it. |
2003 | Yes Bank established |
2005 | Banking Ombudsman scheme was launched. |
2007 | Cheque Truncation System (CTS) started. |
2008 | IDBI Nationalized. This makes number of Nationalized Banks 20 again excluding SBI and its subsidiaries. |
2008 | On 13 August, 2008, State Bank of Saurashtra merged with SBI. This is first associate bank merger in SBI. |
2010 | Bank of Rajasthan is acquired by ICICI. |
2010 | On August 2, 2010, the State Bank of Indore is merged with SBI thus making it second associate bank merger in SBI. |
2012 | RuPay card launched by National Payments Corporation of India (NPCI) on 26 March 2012. The card was later dedicated to India in 2014. |
2014 | On August 28, Pradhan Mantri Jan Dhan Yojana was launched as biggest ever financial inclusion scheme of the government of India. |
2014 | RBI issues 2 new banking licenses to Bandhan Financial Services and IDFC. In the same year, RBI also announced recall of pre-2005 currency notes. |
2015 | Draft guidelines for setting up small banks and payment banks with minimum capital requirement would be Rs 100 crore were issued by RBI. |
2015 | Bandhan Bank becomes first micro-finance company in India to start operation as full-fledged scheduled commercial bank. |
2015 | On 8 April 2015, MUDRA Bank Yojana started with a capital of Rs. 20000 Crore and credit guarantee corpus of Rs. 3000 cr. |
2016 | Government / RBI go for withdrawal of Legal Tender Character of existing ₹ 500/- and ₹ 1000/- Bank Notes and ask the public to deposit of these notes to banks. |
2016 | In February, 2016, Banks Board Bureau (BBB) starts working as an autonomous body of the Government of India tasked to improve the governance of Public Sector Banks, recommend selection of chiefs of government owned banks and financial institutions and to help banks in developing strategies and capital raising plans. Former Comptroller and Auditor General (CAG) Vinod Rai appointed as its first Chairman. |
2016 | In March 2016, the Jalandhar based Capital Local Area Bank (CLAB) Limited became the first financial entity in India to get Small Financial Bank Licence by RBI. |
2016 | National Payments Corporation of India (NPCI) launched “Unified Payments Interface (UPI)” to revolutionise mobile payment system in the country. |
2017 | In April, 2017, five associates and the Bharatiya Mahila Bank have officially merged with country’s largest lender State Bank of India (SBI). With this merger, SBI joins the league of top 50 banks globally in terms of assets. |
Dates of Establishment of various Banks
Year / Date | Bank |
---|---|
1786 | General Bank of India (First bank established in India) |
1790 | Bank Of Hindustan which lasted until. 1832. |
1839 | Union Bank |
02 June 1806 | Bank of Calcutta |
15th April 1840 | Bank of Bombay |
01st July 1843 | Bank of Madras |
1863 | Bank of Upper India |
1865 | Allahabad Bank |
1881 | Oudh Commercial Bank |
19th May 1894 | Punjab National Bank |
1895 | Punjab National Bank In Lahore |
1904 | City Union Bank |
1906 | Bank of India |
12-Mar-06 | Corporation Bank |
15th August 1907 | Indian Bank |
1908 | Bank of Baroda |
01st July 1906 | Canara Hindu Permanent Fund (Renamed as Canara Bank in 1910) |
21st December 1911 | Central Bank of India |
1916 | Karur Vysya Bank |
11-Nov-19 | Union Bank of India |
26th November 1920 | Catholic Syrian Bank |
1921 | Imperial Bank of India by merger of three presidency banks. |
11th May 1921 | Tamilnad Mercantile Bank Limited |
1923 | Andhra Bank |
1924 | Karnataka Bank Limited |
1925 | Syndicate Bank |
1926 | Lakshmi Vilas Bank Limited |
1927 | Dhanlaxmi Bank Ltd |
1929 | South Indian Bank Limited |
23rd October, 1931 | Vijaya Bank |
1934 | Reserve Bank of India |
16th Sept 1935 | Bank of Maharashtra |
1937 | Indian Overseas Bank |
1938 | Jammu & Kashmir Bank |
26th May 1938 | Dena Bank |
19th February 1943 | Oriental Bank of Commerce |
1943 | UCO Bank |
1943 | United Bank of India |
1945 | Federal Bank Limited |
1954 | Nainital Bank Limited |
1955 | State Bank of India (Imperial Bank of India renamed as SBI) |
1985 | Kotak Mahindra Bank |
1994 | UTI Bank (Now Axis Bank) |
Aug-94 | HDFC Bank |
1996 | ICICI Bank |
2003 | Yes Bank |
2013 | Bhartiya Mahila Bank |
Kumar Vikram Aditya
July 28, 2017 at 8:46 amSir,
Page 5 of the topic Brief History of Banking in India is not opening.
Please resolve the issue.
Kalita Cheri
August 13, 2017 at 1:02 pmRespected Sir/Madam;
Page 5th of Brief History of Banking In India cannot be opened.
Kindly do look into the matter as soon as possible.
Thank You
Anil Sehgal
December 20, 2017 at 10:56 pm(1) I have a grievance against a nationalized bank for not operating a small savings a/c as per Hind Sccession Act (amended in 2005).
(2) Has RBI any athority to isse directions to the nationalized bank?
(3) Can RBI act as nodal agency ?
(4) Shall be gratefl for a prompt reply.
Thanks.
Nitin Bopche
May 21, 2018 at 8:23 pmSir, there is no option for next page. How we will read whole contain.
Arush
May 29, 2018 at 1:00 pmImportant dates and date of establishment of various banks is not showing anything. Please resolve this issue.
Arush
May 29, 2018 at 5:32 pmsir tables are not showing up…solve this
Suresh
May 29, 2018 at 6:58 pmSome work is going on this side by developers. Issues will be resolved in some time.
Rishabh Tripathi
June 16, 2018 at 11:12 amvery useful article.
kushal kumar
October 16, 2018 at 12:07 pmSir it’s very useful for banking examination