Development of Banking Business In India
Ø Banking was in existence during Vedic period. Money lending is regarded as an old art and was practiced in the early Aryan days
Ø The term Rina (debt) is often found in Rig Veda
Ø Manusmriti has laid down various terms like Rnapatra, Rnalekhya, Kusidin (soodhkhor) etc which clearly indicates the prevalence of banking even during the ancient Vedic civilization
Ø Evidence of banking is also found in epics like Ramayana and Mahabharata.
Ø Kautilya’s Arthashatra also embodies how banking flourished during mauryan age.
Ø There were instruments in the Mauryan era called “adesha” which were equivalent to Bill of Exchange of current times.
Ø Since ancients times businessmen (Vaishyas) like Shroffs, Seths, Mahajans, Chettis, Sahukars etc carried on banking business. They were small money lenders who charges interest on the amount loaned to people.
Ø The Vaishya community performed the main functions of banking viz granting loans, accepting deposits etc. They even granted loans to kings and managed the currency of the kingdom.
Ø The use of Bills of exchange were also in practice.
Ø Later during Muslim and Mughal period we find decline in banking as Islam does not allow taking of interest. It is considered to be a sin. However economy boomed to some extent as there was the more use of metallic money which led to appointment of more revenue collectors, bankers, money changers, mint officers etc.
Ø With the coming of the East India Company the situation started changing again. The occidental (western) idea of banking stepped into the nation.
Ø In 1770 Hindustan Bank was established followed by Bengal Bank in 1785 and General Bank of India in 1786.
Ø The 1st presidency bank was founded in Calcutta ( Bank of Calcutta) in 1806
Ø The bank of bombay and bank of madrass followed the chain
Ø These 3 banks amalgamated to form imperial bank of india in 1921.
Ø Due to Swadeshi Movement various national entities like peoples bank of India, the bank of India, bank of Baroda, central bank of India etc started functioning
Ø 1913-1924 saw downfall of banking due to trade depression caused by various movements
Ø Finally with the establishment of RBI the need of a central bank was met (April 1 ,1935). It took over the functions of Imperial Bank regarding GOVERNMENT’S transactions .
Ø The banking regulation act 1949 was passed to control all the activities of the commercial banks. RBI's powers were widened.
Ø 1955 SBI was established which totally replaced the imperial bank. It is the largest commercial bank in the country
Ø In order to meet the slow economic growth of the country 14 major banks in1969 got nationalized
Ø Later 6 more banks got nationalized in 1980.
Ø The Nariman Committee in 1969 recommended a scheme to unite the commercials banks co operative banks and government and semi government agencies to work together for socio economic growth of the country. The lead bank scheme was also introduces
Ø NABARD was set up in 1982 (National Bank for Agricultural and Rural Development)
Ø With the use of technology banking at present has become much more user or customer friendly. Banking ombudsmen was established to take care of the grievances of the customers against the services provided to them by the bank.