All you need to know about the Indian Banking Industry.


Know all you need to know about the Indian Banking History. You will get all the information about It’s history, purpose, its relevance and more …


Indian banking is said to be the lifeline of the nation and its people. Banking has immensely helped in developing the vital sectors of the economy and in ushering in a new dawn of progress on the Indian horizon. This sector has translated the hopes and aspirations of millions of people into reality. But to do so, it has had to trudge miles and miles of difficult terrain, suffer the indignities of foreign rule and the horrible pangs of partition. Today, Indian banks can confidently compete with all the modern banks of the world.


The first bank in India, called The General Bank of India was established in the year 1786. The East India Company established The Bank of Bengal/Calcutta (1809), Bank of Bombay (1840) and Bank of Madras (1843). The next bank was Bank of Hindustan which was established in 1870. These three individual units (Bank of Calcutta, Bank of Bombay, and Bank of Madras) were called as Presidency Banks. Allahabad Bank which was established in 1865, was for the first time completely run by Indians. Punjab National Bank Ltd. was set up in 1894 with head quarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. In 1921, all presidency banks were amalgamated to form the Imperial Bank of India which was run by European Shareholders. After that the Reserve Bank of India was established in April 1935.

The following are the major steps taken by the Government of India to Regulate Banking institutions in the country:-

1949 : Enactment of Banking Regulation Act.
1955 : Nationalisation of State Bank of India.
1959 : Nationalization of SBI subsidiaries.
1961 : Insurance cover extended to deposits.
1969 : Nationalisation of 14 major Banks.
1971 : Creation of credit guarantee corporation.
1975 : Creation of regional rural banks.
1980 : Nationalisation of seven banks with deposits over 200 Crores.

Structure of Indian Banking :

According to Section 5(b) of the Banking Regulation Act 1949: “Banking” means the accepting, for the purpose of lending or investment, of money from the public, repayable on demand or otherwise, and withdawal by cheque, draft, order or otherwise.”

All banks which are included in the Second Schedule to the Reserve Bank of India Act, 1934 are scheduled banks. These banks comprise Scheduled Commercial Banks and Scheduled Cooperative Banks.

Scheduled Commercial Banks in India are categorised into five different groups according to their ownership and / or nature of operation. These bank groups are:
(i) State Bank of India and its Associates,
(ii) Nationalised Banks,
(iii) Regional Rural Banks,
(iv) Foreign Banks and
(v) Other Indian Scheduled Commercial Banks (in the private sector).

Besides the Nationalized banks (majority equity holding is with the Government), the State Bank of India (SBI) (majority equity holding being with the Reserve Bank of India) and the associate banks of SBI (majority holding being with State Bank of India), the commercial banks comprise foreign and Indian private banks. While the State bank of India and its associates, nationalized banks and Regional Rural Banks are constituted under respective enactments of the Parliament, the private sector banks are banking companies as defined in the Banking Regulation Act. These banks, along with regional rural banks, constitute the public sector (state owned) banking system in India.
The Public Sector Banks in India are back bone of the Indian financial system.

The cooperative credit institutions are broadly classified into urban credit cooperatives and rural credit cooperatives. Scheduled Co-operative Banks consist of Scheduled State Co-operative Banks and Scheduled Urban Co-operative Banks.

Regional Rural Banks (RRB’s) are state sponsored, regionally based and rural oriented commercial banks. The Government of India promulgated the Regional Rural Banks Ordinance on 26th September 1975, which was later replaced by the Regional Rural Bank Act 1976. The preamble to the Act states the objective to develop rural economy by providing credit and facilities for the development of agriculture, trade, commerce, industry and other productive activities in the rural areas, particularly to small and marginal farmers, agricultural labourers, artisans and small entrepreneurs.

Nationalisation of Banks:

The Government of India issued an ordinance and nationalised the 14 largest commercial banks with effect from the midnight of July 19, 1969. Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received the presidential approval on 9 August 1969.

The need for the nationalisation was felt mainly because private commercial banks were not fulfilling the social and developmental goals of banking which are so essential for any industrialising country. Despite the enactment of the Banking Regulation Act in 1949 and the nationalisation of the largest bank, the State Bank of India, in 1955, the expansion of commercial banking had largely excluded rural areas and small-scale borrowers.

A second dose of nationalization of 6 more commercial banks followed in 1980. The stated reason for the nationalization was to give the government more control of credit delivery. With the second dose of nationalization, the Government of India controlled around 91% of the banking business of India. Later on, in the year 1993, the government merged New Bank of India with Punjab National Bank. It was the only merger between nationalized banks and resulted in the reduction of the number of nationalised banks from 20 to 19. After this, until the 1990s, the nationalised banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy.

List of Nationalised banks:

  1. Allahabad Bank
  2. Andhra Bank
  3. Bank of Baroda
  4. Bank of India
  5. Bank of Maharashtra
  6. Canara Bank
  7. Central Bank of India
  8. Corporation Bank
  9. Dena Bank
  10. Indian Bank
  11. Indian Overseas Bank
  12. Oriental Bank of Commerce
  13. Punjab and Sind Bank
  14. Punjab National Bank
  15. Syndicate Bank
  16. UCO Bank
  17. Union Bank of India
  18. United Bank of India
  19. Vijaya Bank


Is SBI a nationalized bank?

NO, SBI is NOT a nationalized bank. It is a Public sector bank. This power is derived form the State Bank of India Act, 1955.

Why SBI was not nationalized during the waves of Nationalization of Banks in 1969 and 1980?

SBI was already under State control in 1969/1980, vide SBI Act, 1955. So, there was no need of Nationalization of State Bank of India. Banks that were nationalized in 1969 and 1980 were either owned by private business groups or individual investors.