BANKING
A bank is a financial
institution that provides banking and other financial service to their
customers. A bank can accept deposits that can be withdrawn on demand. It also
lends money to those who need it, like individuals and business houses. Bank
plays a significant role in the economy of a nation.
Functions of Bank.
- To provide the security to the savings of customers.
- To provide loans and advances to businessmen for short
term and long term purposes.
- It facilitates business transactions through receipts
and payments by cheques instead of currency.
- It encourages public confidence in the working of the
financial system increase savings speedily and efficiently.
HISTORY OF INDIAN BANKING
The growth of banking
industry in India may be studied in terms of two phases. Pre-independence (1770-1947)
and Post-independence (1947-till date).
Pre-independence
Phase
- The first bank in India was the Bank of
Hindustan was set-up in 1770. The General Bank of India 1786
and Bengal of Calcutta 1806(immediately became the Bank
of Bengal) followed.
- At that time there were very small banks operated by
Indians and most of them were owned and operated by particular community.
The banking in India was controlled and dominated by the presidency banks,
namely The Bank of Bombay, The Bank of Bengal and The
Bank of Madras which later on merged to form the Imperial
Bank of India - 21 January 1921(the oldest bank of India and still
exist with the name of State Bank of India).
- Allahabad Bank was
established, exclusively by Indians in 1865 and still functioning today is
the oldest joint stock bank in India.
- Punjab National Bank was set-up in 1894 with
headquarters in Lahore, which has survived to the present and is now one
of the largest banks in India.
- Between 1906 and 1913, Bank of India, Bank of
Baroda, Central Bank of India, Canara Bank, Indian Bank and Bank
of Mysore were set-up.
- The Reserve Bank of India began
operation in 1935.
Post-Independence
Phase
At the time of
Independence in 1947, the banking system in India was fairly well developed
with over 600 commercial banks operating in the country. And Government took
major steps in this Indian Banking Sector Reform after Independence.
- First major step in this direction was nationalization
of Reserve Bank of India in 1949.
- Enactment of Banking Regulation Act in 1949.
- Government of India nationalized the Imperial Bank
which was established in 1921 and transformed it into the State Bank of
India with effect from 01 July 1955 with extensive banking facilities on a
large scale especially in rural and semi-urban areas.
The period from 1967 to
1991 was characterized by major developments in other words social control on
banks in 1967 and in 1969 the Government of India issued an ordinance and nationalized
the 14 largest commercial banks (Allahabad
Bank, Bank of Baroda, Bank of India, Bank of Maharashtra, Central Bank of
India, Canara Bank, Dena Bank, Indian Bank, Indian Overseas Bank, Punjab
National Bank, Syndicate Bank, UCO Bank, Union Bank and United Bank of India) and 6 more Banks (Andhra Bank, Corporation Bank, New Bank
of India, Oriental Bank of Commerce, Punjab and Sindh Bank and Vijaya Bank) were nationalized in 1980 with this
91% of the banking sector in India came under the government ownership.
New Phase of Indian
Banking system, Reforms after 1991
This phase has
introduced many more products and facilities in the banking sector as part of
the reforms process. The economic and financial sector reforms has strengthened
the India economy and transformed the operating environment of banks and
financial institutions in the country. These came to be known as New Generation
tech-savvy banks, and included Global Trust Bank(the first of such new
generation banks to be set up), which later amalgamated with Oriental Bank of
Commerce, Axis Bank(earlier as UTI Bank), ICICI Bank and HDFC Bank. This move,
along with the rapid growth in the economy of India, revitalized the banking
sector in India, which has seen rapid growth with strong contribution from all
the three sectors of banks, namely, government banks, private banks and foreign
banks.
- In 1991, under the Chairmanship of M Narasimham, a
committee was set-up, which worked for the liberalization (a relaxation of
government restrictions) of banking practices.
- In this phase, the country is flooded with foreign
banks and their ATM stations. Efforts are being put to give a satisfactory
service to customers.
- Phone banking and net banking are introduced. The
entire system became more convenient and swift. Time has given importance
in all money transactions.
