Role Of Banks in Indian Economy
Banking in India originated in the first decade of 18th century with The General Bank of Indiacoming into existence in 1786. This was followed by Bank of Hindustan. Both these banks arenow defunct. The oldest bank in existence in India is the State Bank of India being established as"The Bank of Bengal" in Calcutta in June 1806. A couple of decades later, foreign banks likeCredit Lyonnais started their Calcutta operations in the 1850s. At that point of time, Calcutta wasthe most active trading port, mainly due to the trade of the British Empire, and due to which banking activity took roots there and prospered.The first fully Indian owned bank was the Allahabad Bank, which was established in 1865.By the 1900s, the market expanded with the establishment of banks such as Punjab NationalBank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai - both of which were foundedunder private ownership. The Reserve Bank of India formally took on the responsibility of regulating the Indian banking sector from 1935. After India's independence in 1947, the ReserveBank was nationalized and given broader powers.The Public Sector emerged as the driver of economic growth consequent to the industrialrevolution in Europe. With the advent of globalization, the public sector faced new challenges inthe developed economies. No longer the public sector had the privilege of operating in a sellersmarket and had to face competition both from domestic and international competitors. Further, inthe second half of the 20th century in the developed economies, the political opinion startedswinging towards the views that the intervention as well as investment by Government incommercial activities should be reduced to the extent possible.
Without a sound and effective banking system in India it cannot have a healthy economy. The banking system of India should not only be hassle free but it should be able to meet newchallenges posed by the technology and any other external and internal factors. For the past threedecades India's banking system has several outstanding achievements to its credit. The moststriking is its extensive reach. It is no longer confined to only metropolitans or cosmopolitans inIndia. In fact, Indian banking system has reached even to the remote corners of the country. Thisis one of the main reason of India's growth process. The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalisation of 14 major private banks of India.
GROWTH OF BANKING:
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