Page 26 - Banking Finance June 2024

ARTICLE

THE HISTORY

OF THE INDIAN

BANKING

INDUSTRY

T he history of the Indian Banking Industry is rich Imperial Bank of India:

and diverse, reflecting the country's economic
In 1921, the three Presidency Banks were amalgamated to
and political evolution over the centuries.
form the Imperial Bank of India, which served as a quasi-
Banking services play a vital role in the Indian
central bank and played a crucial role in financing trade and
economy, serving as the backbone of its financial system. industry during the colonial era.
Here's a brief overview:
Post-Independence Era:
Pre-Independence Era:
Following India's independence in 1947, the banking sector
Banking in India traces back to ancient times, with evidence underwent significant reforms aimed at expanding financial
of indigenous banking systems like hundis (bills of exchange) services and promoting economic development. The Reserve
and indigenous bankers known as shroffs or sahukars. During Bank of India (RBI) was nationalized in 1949 and assumed
British rule, the establishment of the Bank of Bengal in 1806
regulatory control over the banking system. The Banking
marked the beginning of modern banking in India. Regulation Act of 1949 empowered the RBI to regulate and
Subsequently, the Bank of Bombay (1840) and the Bank of supervise banks to maintain financial stability, ensure
Madras (1843) were established, collectively known as the prudential norms, and protect depositor interests. The
Presidency Banks.
regulatory framework governs various aspects of banking
operations, including capital adequacy, asset quality, and
corporate governance.

Nationalization of Banks:
In 1969, the government led by Prime Minister Indira
Gandhi nationalized 14 major banks, representing around
85% of the banking sector's assets. This move was aimed at

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