Different Stages of the Development of Indian Banking

- In order to make the Reserve Bank of India more powerful, the Indian Government nationalised it on January 1, 1949.
- With a view to have the co-ordinated regulation of Indian banking, the Indian Banking Act was passed in March 1949.
- According to this Act, the Reserve Bank of India was granted extended powers for the inspection of non-scheduled banks.
- For the development of the banking facilities in the rural areas the Imperial Bank of India was partially nationalised on July 1, 1955 and it was named as the State Bank of India.
- Alongwith it other 8 (at present 7) banks were converted as its associate banks which form what is named as the State Barlie Group.
- They are as follows-
1. The State Bank of Bikaner and Jaipur (In the beginning the State Bank of Bikaner and the State Bank of Jaipur were separate. But they were merged and named as the State Bank of Bikaner and Jaipur)
2. The State Bank of Hyderabad
3. The State Bank of Indore (Merged with SBI)
4. The State Bank of Mysore
5. The State Bank of Saurashtra (Merged with SBI)
6. The State Bank of Patiala
7. The State Bank of Travancore
- After unification of two banks State Bank of Saurashtra and State Bank of Indore, the State Bank Group now has only 5 Associate Banks other than State Bank of India.
- In order to have more control over the banks, 14 large commercial banks whose reserves were more than Rs. 50 crore each were nationalised on 19th July, 1969.
- The nationalised banks are as follows:
1. The Central Bank of India
2. Bank ofIndia
3. Punjab National Bank
4. Canara Bank
5. United Commercial Bank
6. Syndicate Bank
7. Bank of Baroda
8. United Bank of India
9. Union Bank of India
10. Dena Bank
11. Allahabad Bank
12. Indian Bank
13. Indian Overseas Bank
14. Bank of Maharashtra
- After one decade, on April 15, 1980, those 6 private sector banks whose reserves were more than Rs. 200 crore each were nationalised.
- These banks are as :
1. Andhra Bank
2. Punjab and Sindh Bank
3. New Bank of India (Merged with PNB)
4. Vijaya Bank
5. Corporation Bank
6. Oriental Bank of Commerce
- On 4th September, 1993 the Government merged the New Bank of India with Punjab National Bank and as a result of this the total number of nationalised bank got reduced from 20 to 19.
- After joining IDBI Bank in the club of public sector banks, the number of nationalised banks in the country again reached 20 from 19.
- With the transition of the Indian economy to a higher growth trajectory, the provision of adequate and timely availability of bank credit to the productive sectors of the economy has acquired importance.
- As public sector banks still own about 71 per cent of the assets of the banking system, they continue to play an important role in responding to the changes in the economic environment.
- As the banking regulator and supervisor and as the monetary policy authority, the Reserve Bank of India (RBI) continues to guide the banking system, including foreign, private sector and public sector banks, to meet emerging economic challenges.
- As certain rigidities and weaknesses were found to have developed in the banking system during the late eighties, the Government felt that these had to be addressed to enable the financial system to play its role in ushering in a more efficient and competitive economy. Accordingly, a high-level Committee under the Chairmanship of Shri M. Narasirnham on the Financial System (CFS), was set up on August 14,1991 to examine all aspects relating to the structure, organisation, functions and procedures of the financial systems. Based on the recommendations of the Committee a comprehensive reform of the banking system was introduced in 1992-93.
- A high-level Committee, under the Chairmanship of Shri M. Narasirnham was constituted by the Government of India in December 1997 to review the record of implementation of financial system reforms recommended by the CFS in 1991 and chart the reforms necessary in the years ahead.
- The Committee submitted its report to the Government in April 1998.