History of Banking in India - Key Points

History of Banking in India - Key Points

• The Nationalization of Banks in India was done after Independence.
• The partition of India in 1947 adversely impacted the economies of West Bengal and Punjab paralyzing banking activities for months.
• The Government of India initiated measures to play an active role in the economic life of a nation and the Industrial Policy Resolution adopted by Government in 1948.
• The Reserve Bank of India (RBI) is the Central Banking Authority of India. It was nationalized on January 1, 1949 under the “Reserve Bank of India (Transfer to Public Ownership) Act, 1948”.
• In 1949, the Banking Regulation Act was enacted which empowered the RBI “to regulate, control and inspect the banks in India”.
• The Banking Regulation Act ensured that no new Bank or Branch of an existing Bank could be opened without a license from RBI. Also two banks cannot have common Directors.
• In 1955, the Imperial Bank of India with the extensive banking facilities on large scale especially in rural and semi-urban areas is nationalized.

• The Imperial Bank of India was nationalized in 1955 and formed State Bank of India as the principal agent of RBI to handle the banking transactions of the Union and State Governments all over the country.
• Despite the control, provision and regulations of RBI, Banks in India except SBI, continued to be owned and operated by private reasons.
• The Indian Banking industry became a significant tool to facilitate the development of the Indian Economy by 1960. That urged the Government to nationalize the Banks.
• Then Prime Minister of India, Indira Gandhi led Government issued an ordinance and nationalized the 14 largest commercial banks from the midnight of 19th July, 1969.
• The Banking Companies (Acquisition and Transfer of Undertaking) Bill was passed in Parliament on 9th August, 1969.
• 6 Commercial Banks was nationalized in 1980. By this nationalization, the Government of India controlled 91% of Banking Business in India.
• In 1993, the New Bank of India merged with Punjab National Bank.
• Enactment of Banking Regulation Act – 1949
• Nationalization of State Bank of India – 1955
• Nationalization of SBI subsidiaries – 19th July, 1959. These Banks are State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Travancore and State Bank of Patiala. 
• Insurance cover extended to deposits – 1961
• 14 major Banks were nationalized in 1969. These banks are Central Bank of India, Bank of Masharashtra, Dena Bank, Punjab National Bank, Syndicate Bank, Canara Bank, Indian Bank, Indian Overseas Bank, Bank of Baroda, Union Bank, Allahabad Bank, United Bank of India, UCO Bank and Bank of India.
• Creation of Credit Guarantee Corporation – 1971.
• 6 Banks with deposits over Rs. 200 Crore were nationalized in 1980. These banks are Vijaya Bank, Andhra Bank, Corporation Bank, Oriental Bank of Commerce, Punjab and Sindh Bank and New Bank of India.

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