Page 2 - Digi Notes : General Awareness - 09.05.2016
P. 2
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INDIAN BANKING INDUSTRY
HISTORICAL BACKGROUND
The first bank of limited liability managed by Indians was Oudh Commercial Bank founded in 1881. Punjab
National Bank was established in 1894 .
Swadeshi movement, which began in 1906, encouraged the formation of a number of commercial banks.
Banking crisis during 1913 -1917 and failure of 588 banks in various States during the decade ended 1949
underlined the need for regulating and controlling commercial banks.
The Banking Companies Act was passed in February1949, which was subsequently amended to read as
Banking regulation Act, 1949.This Act provided the legal framework for regulation of the banking system by
RBI. The largest bank - Imperial Bank of India - was nationalised in 1955 and rechristened as State Bank of
India, followed by formation of its 8 Associate Banks in1959. In present time SBI has 5 Associate Banks.
On January 1, 1963 State Bank of Bikaner was merged with State Bank of Jaipur and a new bank was
State Bank of Bikaner & Jaipur. In 2008 State Bank of Saurashtra was merged with SBI and State Bank of
Indore was merged with SBI.
With a view to bring commercial banks into the mainstream of economic development with definite
social obligations and objectives, the Government issued an ordinance on 19 July 1969 acquiring
ownership and control of 14 major banks in the country. Six more commercial banks were nationalized from
15 April 1980.
Meaning of Bank
Bank is a lawful organization, which accepts deposits that can be withdrawn on demand. It also lends
money to individuals and business houses that need it.
Role of Banking
Banks provide funds for business as well as personal needs of individuals. They play a significant role in
the economy of a nation. Let us know about the role of banking-
o It encourages savings habit amongst people and thereby makes funds available for productive use.
o It acts as an intermediary between people having surplus money and those requiring money for various
business activities.
o It facilitates business transactions through receipts and payments by cheques instead of currency.
o It provides loans and advances to businessmen for short term and long-term purposes.
o It also facilitates import export transactions.
o It helps in national development by providing credit to farmers, small-scale industries and self-
employed people as well as to large business houses which lead to balanced economic development in
the country.
o It helps in raising the standard of living of people in general by providing loans for purchase of
consumer durable goods, houses, automobiles, etc.
Types of Banks
There are various types of banks which operate in our country to meet the financial requirements of
different categories of people engaged in agriculture, business, profession, etc. On the basis of functions,
the banking institutions in India may be divided into the following types:
1. Central Bank (RBI, in India)
2. Commercial Banks
Public Sector Banks, Private Sector Banks, Foreign Banks
www.mahendraguru.com
INDIAN BANKING INDUSTRY
HISTORICAL BACKGROUND
The first bank of limited liability managed by Indians was Oudh Commercial Bank founded in 1881. Punjab
National Bank was established in 1894 .
Swadeshi movement, which began in 1906, encouraged the formation of a number of commercial banks.
Banking crisis during 1913 -1917 and failure of 588 banks in various States during the decade ended 1949
underlined the need for regulating and controlling commercial banks.
The Banking Companies Act was passed in February1949, which was subsequently amended to read as
Banking regulation Act, 1949.This Act provided the legal framework for regulation of the banking system by
RBI. The largest bank - Imperial Bank of India - was nationalised in 1955 and rechristened as State Bank of
India, followed by formation of its 8 Associate Banks in1959. In present time SBI has 5 Associate Banks.
On January 1, 1963 State Bank of Bikaner was merged with State Bank of Jaipur and a new bank was
State Bank of Bikaner & Jaipur. In 2008 State Bank of Saurashtra was merged with SBI and State Bank of
Indore was merged with SBI.
With a view to bring commercial banks into the mainstream of economic development with definite
social obligations and objectives, the Government issued an ordinance on 19 July 1969 acquiring
ownership and control of 14 major banks in the country. Six more commercial banks were nationalized from
15 April 1980.
Meaning of Bank
Bank is a lawful organization, which accepts deposits that can be withdrawn on demand. It also lends
money to individuals and business houses that need it.
Role of Banking
Banks provide funds for business as well as personal needs of individuals. They play a significant role in
the economy of a nation. Let us know about the role of banking-
o It encourages savings habit amongst people and thereby makes funds available for productive use.
o It acts as an intermediary between people having surplus money and those requiring money for various
business activities.
o It facilitates business transactions through receipts and payments by cheques instead of currency.
o It provides loans and advances to businessmen for short term and long-term purposes.
o It also facilitates import export transactions.
o It helps in national development by providing credit to farmers, small-scale industries and self-
employed people as well as to large business houses which lead to balanced economic development in
the country.
o It helps in raising the standard of living of people in general by providing loans for purchase of
consumer durable goods, houses, automobiles, etc.
Types of Banks
There are various types of banks which operate in our country to meet the financial requirements of
different categories of people engaged in agriculture, business, profession, etc. On the basis of functions,
the banking institutions in India may be divided into the following types:
1. Central Bank (RBI, in India)
2. Commercial Banks
Public Sector Banks, Private Sector Banks, Foreign Banks
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