Banking in India – Part 1

Part 1

A Bank

A bank is a financial institution that is licensed to accept deposits from and grant credit to people/legal entities.
Apart from this, the banks also perform wealth management and currency exchange services so that the financial part remains well settled for human beings.
They play an important role in maintaining and improving a country’s economic standing.
Hence banking is one of the most strictly regulated sectors in most countries.
In India, the Reserve Bank of India (RBI) is the apex banking institution in charge of regulation in the banking sector.

The first bank recorded in the world is the Bank of Babylon established in ancient Mesopotamia in the 18th century BCE.
The Arthashastra of Kautilya mentions presence of bankers during Mauryan era, known as “Adesha” which are equivalent to Bill of exchange of current times.
The Madras Bank founded in the year 1683 is the oldest bank in Modern India.
The Madras Bank was eventually merged with the Bank of Madras in 1843.
The Bank of Madras merged with the Bank of Bengal and the Bank of Bombay in 1921 to form the Imperial Bank of India.
The Imperial Bank of India was nationalized and renamed as State Bank of India (SBI) in 1955.
The first bank to be managed fully by Indians was Punjab National Bank which was established in Lahore in 1895.
However, the Central Bank of India which was established in 1911 was the first Indian commercial bank to be wholly owned and managed by Indians.

Riksens Ständers Bank (the Estates of the Realm Bank) founded in 1668 in Sweden is the oldest Central Bank in the World.
The Reserve Bank of India was set up on April 1, 1935 under the recommendations of the Hilton Young Commission.
The Reserve Bank of India Act, 1934 (II of 1934) provided the statutory basis of the functioning of the Bank.
After the partition of India, the Reserve Bank served as the central bank of Pakistan until June 1948 when the State Bank of Pakistan began its operations.
The RBI which was created as a shareholder’s bank, was nationalised in 1949.

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