Overview and revision

Evolution of banking system, various aspects of modern banking, roles and

services of banks, structure of the banking system, mechanisms of credit
creation by commercial banks, different types of banks and their functions,
the achievements and shortcomings of the Indian Banking System.
• Roots of the financial sector- Hundi system and money lenders
• John Maynard Keynes report- bank of Hindostan and presidency banks
• Swadeshi movement – mushrooming of banks- Indian Companies Act,
2013
• Central Banking Enquiry committee was set up in 1929 and the RBI
was set up in 1935
• Banking Companies Act and Banking Regulation Act 1949
• Formation of SBI- 1955 and its subsidiaries -1960
• Nationalisation 1969
Post Nationalisation
• On July 19th1969, 14 banks with deposits of at least Rs. 50 crores
• This ordinance was initially challenged and after a 34 day trial, the road blocks
were removed and the process was complete.
• Since then there has been no looking back until now when we are contemplating
privatisation
• There were 8187 branches in June 1969 and 120535 branches as on December
2019.
• Rural branches were 1443 then and they are 35649 now- clearly the objective of
mass banking has been reached.
• Deposits increased from 4646 crores to 137.5 lakh crores and bank credit from
3599 crore to 104.5lakh crore
Benefits of nationalisation
• Customer oriented
• Growth of priority sector
• Standardised procedures
• Helped in pushing government agenda
• Encouraged savings
• Evened out regional disparities
Privatisation benefits
• Perfect competition, hence efficient
• More customer oriented
• Took banking to global levels
• Less intervention at government level
Evolution of Banks in India
Period Phases Remarks

Before 1913 Victorian Era Evolution of banks in India starting

from Bank of Bengal in 1809
followed by the setting up of other
Presidency banks

1914- 1946 World wars Expansion of the banking sector

1947-1969 Pre- nationalisation period Class banking

1970-1985 Post nationalization period Mass banking
1985-1990 Pre – reformative era Consolidation phase

1991 onwards Reformative era Banking sector reforms were

introduced