Evolution of Banking in India
From the time it was introduced the present day, banking in India has evolved a great deal. First established in the year 1770, banks in the eighteenth century were unsuccessful in maintaining their stability, leading to liquidation of the banks then founded. The first bank to have been instituted which to this day remains as one of the prominent banks is the State Bank of India, established since 1806.
While the banking sector had no steady hold in India a few decades into its foundation, it has gone on to become one of the leading sectors in the country in terms of consumption as well as returns. Advancing rapidly, the dynamic evolution of banking in India can be summed up in three phases which are described below.
The early phases that lasted from 1786 to 1969 began with the establishment of the general Bank of India in the year 1786. With Calcutta being a major trading centre in India, the Bank of Calcutta was established in 1806, later renamed the Bank of Bengal. One of the three banks funded by Presidency, the Bank of Calcutta eventually merged with the other two, i.e. the Bank of Madras, and the Bank of Bombay, forming the Imperial Bank of India. As the public then did not have much confidence in the banks, the mobilisation of deposits was slow during this phase.
After independence, the Imperial Bank of India was nationalised by the government, providing banking facilities, especially in rural and semi-urban areas. The State Bank of India was then formed to oversee the Reserve Bank of India. Banking in India saw a tremendous growth in this phase with fourteen major commercial banks being nationalised with the effort of Mrs Indira Gandhi, the then Prime Minister. About 80% of banking sectors were brought under the ownership of the government during this phase.
During this phase, a committee was formed under the chairmanship of M. Narasimham that worked to liberalise banking practices. This phase brought about numerous reforms to provide the best service to customers. Phone and internet banking, along with the emergence of ATMs and foreign banking, banking in India has become easy and convenient for everyone.