History of Banking in India: Origin & Its Evolution

History of Banking in India: We provide you the information about the baking system in India. Before knowing about the baking system we will discuss the evolution and history of banking in India. We do provide all information about the banking system of India in the form pdf and the candidates can download it for further reference. The history of banking in India pdf has been attached in this article and the aspirants appearing for all competitive exams found it to be more useful. The competitive exams are becoming tougher these days. As the number of aspirants applying for competitive exams becomes high making the competitive exams tougher nowadays. Clearing a competitive exam becomes easy when you can clear the general knowledge section. Static GK revolves around the topic of banking in India. The candidates appearing for bank exams must know all details about the banking system and the history of banking in India. This article will be useful for all the candidates applying for banking exams.

Check out List of Important Revolutions in India

History of Banking in India: Banking system 

What is a Bank? 

A bank is a financial sector that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Leading activities can be directly performed by the bank or indirectly through capital markets. Because bank plays a vital role in financial stability and the economy of a country, most jurisdictions exercise a high degree of regulation over banks. Thus, banks lower transactions costs and act as financial intermediaries as they bring savers and borrowers together. Along with making transactions much safer and easier, banks also play a key role in the creation of money. Banks are critical intermediaries in what is called the payment system, which helps the economy exchange goods and services for money or other financial assets.


History of Banking in India:

Banking in India forms the base for the economic development of the country. Major changes in the banking system and management have been seen over the years with the advancement in technology, considering the needs of people.


The Banking sector in India has seen a lot of transitions and changes over the centuries. It can be broadly categorized into 3 sub-parts that are:


  1. Pre-Independence (Before 1947)
  2. II Phase (1947 to 1991)
  3. III Phase (1991 and beyond). 


Pre-Independence (1770 to 1947):

There were quite a few banks established during this time. The Banking System in India began with the establishment of the Bank of Hindustan in 1770 but it stopped operating by 1832. During this period, over 600 banks were established. However, very few were able to succeed. During the British rule in India, The East India Company had established three banks: Bank of Bengal, Bank of Bombay, and Bank of Madras and called them the Presidential Banks. These three banks were later merged into one single bank in 1921, which was called the “Imperial Bank of India.” The Imperial Bank of India was later nationalized in 1955 and was named The State Bank of India, which is currently the largest Public sector Bank.


Given below is a list of other banks that were established during the Pre-Independence period


Bank Name

Year of Establishment

Allahabad Bank


Punjab National Bank


Bank of India


Central Bank of India


Canara Bank


Bank of Baroda



The reasons why many major banks failed to survive during the pre-independence period, the following conclusions can be drawn:


  • Indian account holders had become fraud-prone.
  • Lack of machines and technology.
  • Human errors & are time-consuming.
  • Fewer facilities.
  • Lack of proper management skills.


Post-Independence (1947 to 1991):

Following the Pre-Independence period was the post-independence period which observed some major changes in the banking industry scenario and has to date developed a lot.


The then Government – after Indian Independence, decided to nationalize the Banks because all the major banks were led privately which was a cause of concern as people in the rural areas still turned to money lenders for assistance.


Under the Banking Regulation Act, 1949, these banks were nationalized and the Reserve Bank of India was nationalized in 1949. These banks are

  1. Allahabad Bank               
  2. Bank of India                          
  3. Bank of Baroda
  4. Central Bank of India
  5. Bank of Maharashtra  
  6. Canara Bank         
  7. Dena Bank
  8. Indian Overseas Bank
  9. Indian Bank
  10. Punjab National Bank                         
  11. Syndicate Bank             
  12. Union Bank of India
  13. United Bank
  14. UCO Bank


In  1980, 6 other banks were nationalized that are: 

  1. Andhra Bank
  2. Corporation Bank
  3. New Bank of India
  4. Oriental Bank of Comm.
  5. Punjab & Sind Bank
  6. Vijaya Bank


Seven subsidiaries of SBI which were nationalized in 1959:

  1. State Bank of Patiala 
  2. State Bank of Hyderabad 
  3. State Bank of Bikaner & Jaipur 
  4. State Bank of Mysore 
  5. State Bank of Travancore 
  6. State Bank of Saurashtra


All these banks were later merged with the State Bank of India in 2017, except for the State Bank of Saurashtra, which was merged in 2008.  State Bank of Indore was merged in 2010.


There were several reasons for nationalism in the banks of India that are:

  • Nationalism led to an increase in funds and thereby increased the economic condition of the country. 
  • It increased efficiency. 
  • It helped in boosting the rural and agricultural sectors of the country. 
  • This opened up a major employment opportunity for the people. 
  • The profit gained by Banks was used by the Government for the betterment of the people. 
  • The competition was decreased and work efficiency had increased.


The post-independence phase was the one that led to the major development of the banking sector in India.


Liberalization Period (1991 to date):

To provide stability and profitability to the Nationalised Public sector Banks, the Government decided to set up a committee under the leadership of Shri. M Narasimham to manage the various reforms in the Indian banking industry. The biggest development was the introduction of Private sector banks in India. RBI gave licenses to 10 Private sector banks to establish themselves in the country. These banks included:


  1. Global Trust Bank
  2. ICICI Bank
  3. HDFC Bank
  4. Axis Bank
  5. Bank of Punjab
  6. IndusInd Bank
  7. Centurion Bank
  8. IDBI Bank
  9. Times Bank
  10.  Development Credit Bank


A majority of Indian citizens shifted to online or net banking.


Candidates can download the history of banking notes pdf in this article. Click here for a history of banking notes pdf download.


Banking Systems and Their Role:

The banking system is considered the backbone of a nation's economy. The main functions of the commercial banking system include borrowing to lend. To receive deposits and to advance loans are the two main functions of all commercial banks. Other than these there are five other functions of commercial banks and they are acceptance of deposits. Banks mainly depend on the funds deposited with them by the public. Advancing loans is another function. Banks give loans to businessmen and firms usually for short period only. Discounting bills of exchange or hundies is another important function. Bank transfer money from one place to another for their customers. The final properties of the banking system provide miscellaneous functions which include providing a locker, purchasing and selling of stocks, etc.


Components of the Banking System:

The banking system is made up of the following sectors in India. The components of the banking system are given below.


Reserve bank of India (RBI):

The Reserve Bank of India (RBI) is the central bank of India. The RBI was originally set up as a private entity in 1935, but it was nationalized in 1949. The main purpose of the RBI is to conduct consolidated supervision of the financial sector in India, which is made up of commercial banks, financial institutions, and non-banking finance firms. The RBI formulates, implements, and monitors India’s monetary policy. The bank’s management objective is to maintain price stability and ensure that credit is flowing to productive economic sectors. The RBI also manages all foreign exchanges under the Foreign Exchange Management Act of 1999.


Scheduled Banks: 

Scheduled banks are those banks that are listed under Schedule II of the Reserve Bank of India Act, 1934. The bank's paid-up capital and raised funds must be at least Rs. 5 lakh to qualify as a scheduled bank. These banks are liable for low-interest loans from the RBI. They also have membership in clearinghouses. They also have numerous obligations to fulfill such as maintaining an average daily Cash Reserve Ratio with the central bank.


Un-scheduled Banks:

Non-scheduled banks, by definition, are those that do not adhere to the RBI’s regulations. They are not mentioned in the Second Schedule of the RBI Act, 1934, and are therefore deemed incapable of serving and protecting depositors’ interests. Non-scheduled banks must also meet the cash reserve requirement, not with reserve banks, but with themselves. They are generally smaller in size and have a range of influence that is somewhat narrow. They are risky to do business with due to their financial limitations. The reserve capital of these banks is less than 5 lakh rupees.


Commercial banks:

The term commercial bank refers to a financial institution that accepts deposits, offers checking account services, makes various loans, and offers basic financial products like certificates of deposit (CDs) and savings accounts to individuals and small businesses. A commercial bank is where most people do their banking. Commercial banks make money by providing and earning interest from loans such as mortgages, auto loans, business loans, and personal loans. Customer deposits provide banks with the capital to make these loans.


Public sector Banks:

A public bank is a financial institution, in which a state, municipality, or public actors are the owners. It is an enterprise under government control. Public or 'state-owned' banks proliferated globally in the late 19th and early 20th centuries as vital agents of industrialization in capitalist and socialist countries alike; as late as 2012, state banks still owned and controlled up to 25 % of total global banking assets. Proponents of public banking argue that policymakers can create public-sector banks to reduce the costs of government services and infrastructure; protect and aid local banks; offer banking services to people and entities underserved by private-sector banking, and promote particular kinds of economic development reflecting polities’ shared notions of social good. A table of private sector banks is given below.


Public Sector Bank


Punjab National Bank ( Merged with Oriental Bank Of Commerce and United Bank Of India)

New Delhi

Indian Bank( Merged with Allahabad Bank)


State Bank of India


Canara Bank( Merged with Syndicate Bank)


Union Bank of India( Merged with Andhra Bank and Corporation Bank)


Indian Overseas bank


UCO Bank


Bank of Maharashtra


Punjab and Sind Bank

New Delhi

Bank of India


Central Bank of India


Bank of Baroda



Private sector Banks:

Private Sector Banks are those banks in which the majority of the stake is held by shareholders of the bank and not by the government. RBL Bank, HDFC Bank, ICICI Bank, Yes Bank, etc. are the private sector banks in India. They provide all the banking products and services to the customers. These products include Fixed Deposit, Savings Deposit, RD, Home Loan, Personal Loan, Car Loan, Locker, Demat Facilities, Debit/ Credit Card, ATM, Foreign Exchange Transactions, Insurance, Wealth Management, Net Banking, etc. Private banks are known for introducing information technology in the banking system.


The list of private sector banks are tabulated below


Name of the Bank




Axis Bank



Mumbai, Maharashtra

Bandhan Bank



Kolkata, West Bengal

CSB Bank



Thrissur, Kerala

City Union Bank



Kumbakonam, Tamil Nadu

DCB Bank



Mumbai, Maharashtra

Dhanlaxmi Bank



Thrissur city, Kerala

Federal Bank



Aluva, Kochi




Mumbai, Maharashtra




Mumbai, Maharashtra




Mumbai, Maharashtra




Mumbai, Maharashtra

IndusInd Bank



Pune, Maharashtra

J&K Bank



Srinagar, Jammu, and Kashmir

Karnataka Bank



Mangaluru, Karnataka

Karur Vysya Bank



Karur, Tamil Nadu

Kotak Mahindra Bank



Mumbai, Maharashtra

Nainital Bank



Nainital, Uttarakhand

RBL Bank



Mumbai, Maharashtra

South Indian Bank



Thrissur, Kerala

Tamilnad Mercantile Bank



Tuticorin, Tamilnadu

YES Bank



Mumbai, Maharashtra


Foreign Banks:

Foreign Banks in India do make a share of 7% in the total Indian Banking Sector, whereas giving a profit of 11% to the Indian economy, and there is only 1% branch network of Foreign Banks in India, as they are mostly niche players by focusing more on trade finance, wholesale lending, external commercial borrowing, treasury service, and investment banking. These banks are under the regulation of the Reserve Bank of India, as RBI allows either the branch mode or wholly-owned subsidiary, and this Single Mode of Presence Banks are very less in India but manage their customers with good transactions giving good capital as guided by RBI regulations. They are 45 international/foreign banks in India


Foreign Sector Bank

Bank Website

AB Bank Limited


Abu Dhabi Commercial Bank Ltd.


American Express Banking Corp. (AEBC)


ANZ Banking Group Ltd.


Bank of America N.A.


Bank of Bahrain & Kuwait BSC


Barclays Bank Plc




Citibank N.A.


Cooperative Rabobank U.A


Credit Agricole Corporate And Investment Bank


Credit Suisse AG

credit-sussie.com/in /on/investment-banking

CTBC Bank Co Ltd


DBS Bank India Ltd


Deutsche Bank AG


Doha Bank


Emirates NBD Bank (P.J.S.C)


First Abu Dhabi Bank PJSC


FirstRand Bank Ltd


Industrial and Commercial Bank of China Ltd. (ICBC)


Industrial Bank Of Korea


J P Morgan Chase Bank, N.A.




KEB Hana Bank


Kookmin Bank


Krung Thai Bank Public Company LTD


Mashreqbank psc


Mizuho Bank Ltd.


MUFG Bank Ltd


National Australia Bank (NAB)



PT Bank Maybank Indonesia Tbk


Qatar National Bank Q P S C.




SBM Bank (India) Ltd.


Shinhan Bank

[email protected]

Societe Generale


Sonali Bank Ltd.


Standard Chartered Bank


Sumitomo Mitsui Banking Corporation


The Bank of Nova Scotia


The Hongkong & Shanghai Banking Corporation Ltd.


The Royal Bank of Scotland N V


United Overseas Bank Limited


Westpac Banking Corporation


Woori Bank



Regional Banks:

Regional Rural Banks are government-owned scheduled commercial banks of India that operate at the regional level in different states of India. These banks are under the ownership of the Ministry of Finance, Government of India. They were created to serve rural areas with basic banking and financial services. There are a total of 56 regional banks in India.


Co-operative Banks:

Co-operative banks are financial entities established on a cooperative basis and belonging to their members. This means that the customers of a cooperative bank are also its owners. These banks provide a wide range of regular banking and financial services. Also, these Cooperative Banks are regulated by the Reserve Bank of India and were governed by the banking regulation Act 1949, Banking Laws Act 1955, and there are a total of 31 Cooperative Banks in India, which are individually under by Government Firms to provide service to their employees.


Urban Co-operative Bank:

The term Urban Co-operative Banks (UCBs), though not formally defined, refers to primary cooperative banks located in urban and semi-urban areas. These banks, till 1996, were allowed to lend money only for non-agricultural purposes. There are 1,531 urban cooperative banks (UCBs) and 97,006 rural cooperative banks, with the latter making up 65% of the total asset size of all cooperatives taken together.


State Co-operative Bank:

The state cooperative bank is a federation of the central cooperative bank and acts as custodian of the cooperative banking structure in the State. Its funds are obtained from the social capital, deposits, loans, and overdrafts of the Reserve Bank of India.


So refer to the previous question paper to know the importance of the banking system in India. This article containing the history of banking in India will be useful for candidates to clarify their doubts regarding the banking system in India. Candidates who are willing to apply for the upcoming Government exams must ensure that they have proper notes and sufficient study material to prepare for the exam. The aspirants can history of banking in India pdf and a list of the banking system in India pdf as reference material. Do download history of banking notes pdf for future references.


History of Banking in India: FAQs

Q. Who is the father of Indian Baking?

A. Maidavolu Narasimham was an Indian banker who served as 13th governor of RBI from May 2, 1977, to 30, November 1977. For his contribution, he is referred to as the father of Indian Banking.


Q. Who introduced Bank in India?

A. The Banking System in India began with the establishment of the Bank of Hindustan in 1770 but it stopped operating by 1832.


Q. Which is the first private bank in India?

A. The Nedungadi Bank was the first private sector bank in India, founded in 1899 by Rao Bahadur T.M.Appu Nedungadi in Kozhikode, Kerala.


Q. Which bank introduced ATM in India?

A. The first ATM in India was set up in 1987 by HSBC in Mumbai.


  • TAGS

Recent Posts

List of Dance Forms in India 2022 PDF: Classical And Folk Dance Forms

Oct 03 2022

Monthly Current Affairs 2022 Capsule PDF: Free Download - In Hindi & English

Oct 03 2022

Important Days in October 2022: Check the National and International Days with their themes

Oct 03 2022

Don’t Miss Any Update

Enter the valid e-mail id and subscribe to Guidely to get the latest updates on all job notifications, Study Materials, Mock Tests and our new launches.