Principles and practices of

Banking
Bharathi Sunagar

Origin of banks
Phase 1: Early phase 1786-1969
Phase 2: Nationalization of Indian
banks up to 1991
Phase 3: New phase of Indian
banking system after 1991

Phase 1

General bank of India set up in 1786

Bank of Hindustan
East India company established
Bank of Bengal- 1809
Bank of Bombay-1840
Bank of Madras-1843 As independent Presidency banks
These 3 banks were amalgamated in 1920 called Imperial
Bank of India with private shareholders
1865- Allahabad Bank by Indians
1894- Punjab National Bank
1906-1913 : Bank of India,Central bank of India, Bank of
Baroda, Canara Bank, Indian Bank & Bank of Mysore
1935: Reserve bank of India

 Growth was slow & failures were

frequent
1100 Banks
According to 1934 RBI Act RBI
constituted as Apex bank under Govt
1949- Banking companies act to
streamline the functioning of banks

Phase 2

After Independence 1955- Nationalized Imperial bank of India SBI Act

SBI under RBI to handle banking transactions of union & state govt
1969- Seven subsidiary banks of SBI were nationalized
14 more private commercial banks were nationalized
Central bank of India
Bank of Maharashtra
Dena Bank
Punjab National bank
Syndicate bank
Canara bank
Indian Bank
Indian overseas bank
Bank of Baroda
Union Bank
Allahabad Bank
United bank of India
UCO Bank
Bank of India

Steps taken to regulate banking

institutions

1949-Banking regulation act

1955- Nationalization of SBI
1959- Nationalization of SBI subsidiaries
1961- Insurance cover extended to deposits
1969- Nationalization of 14 banks
1971- Creation of credit guarantee corporation
1975- creation of RRB
1980- Nationalization of 7 banks with deposits
over Rs 200 cr

Phase 3
Development
More products & facilities
M Narasimham committee for
liberalization of banking practices
Foreign banks
ATMs
Customer service
Phone & net banking

History of Banking in India

Vedas & Manusmriti- Indigenous
banking system
Kautilyas Arthashastra mentions
presence of Bankers during
Chandragupta maurya
Sahukar lended money: interest
charged according to caste ex:
Brahmin-24, shudra-60
British rule was a setback for these
indegenous bankers

Beginning of Accounting Systems

Kautilya, in 330 B.C. recognised the
importance of accounting methods in
economic enterprises. He developed Bookkeeping rules to record and classify
economic data. He also linked the
successful enforcement of rules and
regulations to their clarity, consistency
and completeness. He also emphasised
the role of ethics in the economic
activities.

 RBI was set with Rs 5 cr

recommended by Hilton Young
Commission
Acted an govt funder, and bankers
bank

Classification of banks

Types of banking

Branch banking
Unit banking
Group
Mixed
Chain
Retail
Wholesale

Relationship
Banking
Correspondent
Narrow
Rural
Universal
Social
Virtual