Banking in India – Part 1

Banking in India Part 1

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.

History of Banking

  • 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.

History of RBI

  • 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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