Banking in India

"Indian Banks" redirects here. For the historic house in the United States, see Indian Banks (Simonson, Virginia).

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Modern banking in India originated in the mid of 18th century. Among the first banks were the Bank of Hindustan, which was established in 1770 and liquidated in 1829–32; and the General Bank of India, established in 1786 but failed in 1791.[1][2][3][4]

The largest and the oldest bank which is still in existence is the State Bank of India (SBI). It originated and started working as the Bank of Calcutta in mid-June 1806. In 1809, it was renamed as the Bank of Bengal. This was one of the three banks founded by a presidency government, the other two were the Bank of Bombay in 1840 and the Bank of Madras in 1843. The three banks were merged in 1921 to form the Imperial Bank of India, which upon India's independence, became the State Bank of India in 1955. For many years, the presidency banks had acted as quasi-central banks, as did their successors, until the Reserve Bank of India[5] was established in 1935, under the Reserve Bank of India Act, 1934.[6][7]

In 1960, the State Banks of India was given control of eight state-associated banks under the State Bank of India (Subsidiary Banks) Act, 1959. However the merger of these associated banks with SBI went into effect on 1 April 2017. In 1969, the Government of India nationalised 14 major private banks; one of the big banks was Bank of India. In 1980, 6 more private banks were nationalised.[8] These nationalised banks are the majority of lenders in the Indian economy. They dominate the banking sector because of their large size and widespread networks.[9]

The Indian banking sector is broadly classified into scheduled and non-scheduled banks. The scheduled banks are those included under the 2nd Schedule of the Reserve Bank of India Act, 1934. The scheduled banks are further classified into: nationalised banks; State Bank of India and its associates; Regional Rural Banks (RRBs); foreign banks; and other Indian private sector banks.[7] The SBI has merged its Associate banks into itself to create the largest Bank in India on 1 April 2017. With this merger SBI has a global ranking of 236 on Fortune 500 index. The term commercial banks refers to both scheduled and non-scheduled commercial banks regulated under the Banking Regulation Act, 1949.[10]

Generally the supply, product range and reach of banking in India is fairly mature-even though reach in rural India and to the poor still remains a challenge. The government has developed initiatives to address this through the State Bank of India expanding its branch network and through the National Bank for Agriculture and Rural Development (NABARD) with facilities like microfinance. According to the Reserve Bank of India (RBI), there are over 24.23 million fixed deposits in India, with a total of over ₹103 trillion (US$1.2 trillion) currently locked in these deposits. This figure surpasses the ₹18.5 trillion (US$220 billion) held in current accounts and ₹59.70 trillion (US$720 billion) in savings accounts, which together come to ₹181 trillion (US$2.2 trillion).[11][12] The majority of research studies state that Indians have historically preferred bank deposits over other investing options because of safety and security.[13][14][15] Over 95% of Indian consumers prefer to keep their money in bank accounts, while less than 10% choose to invest in equities or mutual funds, according to a SEBI survey.[16] As per the Reserve Bank of India (RBI), a significant portion of Indian household financial assets are held in the form of bank deposits.[17][18][19][20][21] This is consistent with the traditional preference of Indian households for safe and liquid assets.[20][17][18]

  1. ^ Radhe Shyam Rungta (1970). The Rise of Business Corporations in India, 1851–1900. CUP Archive. p. 221. GGKEY:NC1SA25Y2CB. Retrieved 12 January 2015.
  2. ^ H. K. Mishra (1991). Famines and Poverty in India. APH Publishing. p. 197. ISBN 978-81-7024-374-8. Retrieved 12 January 2015.
  3. ^ Muthiah S (2011). Madras Miscellany. Westland. p. 933. ISBN 978-93-80032-84-9. Retrieved 12 January 2015.
  4. ^ "The Advent of Modern Banking in India: 1720 to 1850s". Reserve Bank of India. Archived from the original on 26 May 2013. Retrieved 12 January 2015.
  5. ^ "The Reserve Bank of India's big surprise". The Hindu. Archived from the original on 25 December 2022. Retrieved 26 February 2017.
  6. ^ "Evolution of SBI". State Bank of India. Archived from the original on 14 April 2021. Retrieved 12 January 2015.
  7. ^ a b "Business Financing: Banks". Government of India. Archived from the original on 16 April 2008. Retrieved 12 January 2015.
  8. ^ "Social Controls, the Nationalisation of Banks and the era of bank expansion – 1968 to 1985". Reserve Bank of India. Archived from the original on 16 January 2023. Retrieved 12 January 2015.
  9. ^ D. Muraleedharan (2009). Modern Banking: Theory And Practice. PHI Learning Pvt. Ltd. p. 2. ISBN 978-81-203-3655-1. Retrieved 12 January 2015.
  10. ^ "Directory of Bank Offices: Certain Concepts". Reserve Bank of India. Archived from the original on 25 December 2022. Retrieved 12 January 2015.
  11. ^ Chadha, Sunainaa (7 July 2024). "How much do Indians save in FDs? All India average is Rs 4.25 lakh". www.business-standard.com. Archived from the original on 25 January 2024. Retrieved 28 April 2024.
  12. ^ "Decoded: How much Indians save in Fixed Deposits". 11 July 2023. Archived from the original on 25 January 2024. Retrieved 25 January 2024.
  13. ^ Swamy, S. (2010). Economic Development and Reforms in India and China: A Comparative Perspective. Har-Anand Publications. pp. 105–120. ISBN 978-8-1241-1535-0. LCCN 2010327657.
  14. ^ Bora, C.A.P.P. (2022). INVESTMENT PERSPECTIVES & OPPORTUNITIES FOR RETAIL INVESTORS IN INDIA. Ashok Yakkaldevi. pp. 100–120. ISBN 978-1-4357-6364-7.
  15. ^ T, G. Behavioural Influence on Investment Decision by Residents & Non Residents of India. Archers & Elevators Publishing House. pp. 75–85. ISBN 978-9-3949-5823-4.
  16. ^ "Indians Prefer Fixed Deposits to Equities MFS For Investment Sebi Survey". www.business-standard.com.
  17. ^ a b Mehta, Riju (15 June 2020). "66% of household assets are kept as bank fixed deposits, cash: RBI bulletin". The Economic Times.
  18. ^ a b "Reserve Bank of India - RBI Bulletin".
  19. ^ "Reserve Bank of India - Publications".
  20. ^ a b "Reserve Bank of India - RBI Bulletin".
  21. ^ "Reserve Bank of India - RBI Bulletin".