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Banking Evolution - History
Banking Evolution - History
Banking Evolution - History
LADDER OF ECONOMIC
CIVILIZATION
Barter Trade
Commodity,metallic Money
Symbolic Money
Credit Money
Credit Clearance
ORIGIN
The word ‘Bank’ has been derived from the Latin word ‘bancus’
or ‘banque’. The meaning of it in English is a bench. The early
bankers transacted their business at benches in a market place.
According to some authorities, the word bank was originally
derived from German word bank. It means a joint stock fund.
This word later on was called as ‘banco’ in Italy when a great
part of Italy was ruled by the Germans. Even it is evidenced that
the banking system was prevailing at the time of Babilon
culture. The banks were in existence in Rome also.
INTRODUCTION
demand.
It also lends money to individuals and business houses that need it.
Banks also render many other useful services–like collection of bills, payment
offoreign bills, safe-keeping of jewellery and other valuable items, certifying the
Banks accept deposits from the general public as well as from the
business community.
Anyone who saves money for future can deposit his savings in a bank.
Businessmen have income from sales out of which they have to make payment
for expenses.
They can keep their earnings from sales safely deposited in banks to meet
their
expenses from time to time.
Banks give two assurances to the depositors–a)Safety of deposit, and b)Withdrawal of
deposit, whenever needed
ESTABLISHMENT OF BANKING
SYSTEM
The first bank in USA was set up
in Philadelphia in the year 1782.
The banking system in India defines banking through the Banking Companies Act of
1949.
HISTORY OF BANKING SYSTEM
HISTORY OF BANKING SYSTEM
PHASE
1
The General Bank of India was established in 1786. Then came the Bank
of Hindustan and Bengal Bank.
The East India Company established Bank of Bengal
(1809). Bank of Bombay (1840)
Bank of Madras (1843) and these banks were called as
Presidency Bank.
These three banks were amalgamated in 1920 and named as the imperial Bank of
India, which was started as the Private shareholder bank with mostly European
Shareholder.
PHASE
1
In 1865 Allahabad Bank was established and for the first time exclusively by
Indians.
Punjab National Banks was setup in 1894 with head quarter in Lahore.
Between 1906 to 1913 many Banks were established namely Canara Bank, Central
Bank, Bank of India, Bank of Baroda, Indian Bank, Bank of Mysore were
established.
Approximately 1100 banks were established.
To streamline the banks and to gain control over the banks Govt. of India came up
with the Banking Companies Act in 1948 , which was later changed to Banking
Regulation Act 1949.
PHASE
2
Govt. took Major steps to bring reforms in Indian Banking Sector after independence.
In 1955, the nationalized The Imperial Bank of India with extensive banking
facilities on a large scale especially in rural and Semi-urban areas.
In 1969 late Prime Minister Mrs. Indra Gandhi nationalized 14 commercial Banks.
PHASE 2
In 1980 seven more banks were nationalized which brought around 80% banks under the
control of Govt.
Govt took the following steps:
1949 Enactment of Banking Regulation
Act 1955 Nationalization of SBI
1959 Nationalization of SBI Subsidiaries
1961 Insurance cover extended to deposits
1969 Nationalization of 14 commercial banks
1971 Creation of credit guarantee
corporation
1975 Creation of Regional Rural Banks
(RRB)
PHASE
3
This phase brought many facilities in the banking sector. In 1991 under
the
During this country is pooled with Foreign banks & ATMs , Phone banking and Net
India (RBI).
THE POST-INDEPENDENCE
PHASE
In 1975, the Government of India recognised that several groups were financially
excluded. Between 1982 and 1990, it created banking institutions with specialised
functions in line with the evolution of financial services in India.
From 1991 onwards, there was a sea change in the Indian economy. The
government invited private investors to invest in India. Ten private banks were
approved by the RBI. A few prominent names which exist even today from this
liberalization are HDFC, Axis Bank, ICICI, DCB and IndusInd Bank.
In the early to mid-2000s, two other banks, Kotak Mahindra Bank (2001) and Yes
Bank (2004), received their licenses. IDFC and Bandhan banks were also given
licenses in 2013-14.
STRUCTURE OF BANKING
RESERVE BANK OF INDIA
RBI came into existence in 1935 as the central banking authority of India with
a
Features with the goals of achieving the equitable allocation of credit and relative
priorities set out in the five years plan.
NATIONALIZATION OF
BANKS
NATIONALIZATIO
Increased Savings: There was a sharp increase in savings with the opening of new branches.
N
As national income rose in the 1970s, gross domestic savings almost doubled.
Improved Efficiency: The efficiency of banks improved with additional accountability. It also
increased public confidence.
Empowering SSIs: Small scale industries (SSIs) received a boost resulting in a proportionate
improvement in the economy.
Financial Inclusion: The overall statistics of the banking sector and the Indian economy
showed a marked improvement. It reflected on parameters like the share of bank deposits to
GDP, gross savings rate, the share of advances to DGP, and gross investment rate from 1969 to
1991.
THE POSITIVE EFFECTS OF
NATIONALISATION
The nationalisation of Indian banks was one of the most significant events
in
NATIONALIZATIO
N
Removal of control of few large Industry & Business
NATIONALIZATIO
Nno longer only restricted to metropolitan areas.
5. Better Outreach: Banks were now
Branches were opened in the remotest corners of the country.
6. A Surge in Public Deposits: The increased reach of banks helped small industries,
agriculture, and the export sector grow. This growth was accompanied by a proportionate
increase in public deposits.
7. Elevating the Green Revolution: The Green Revolution, one of the biggest priority
items on the government’s agenda, received a boost thanks to the support that the newly-
nationalised banks provided to the agricultural sector.
IMPACT OF
NATIONALIZATION
Unprecedented growth in the branch network of the commercial banks.
These have a paid up capital of Rs. 5 lakhs or more and comply with all
They are authorized to borrow funds from the Reserve Bank of India.
They are not listed in the second schedule of the RBI Act.
scheduled bank.