Reforms in Banking Sector in India
CHAPTER-4
DEVELOPMENT AND REFORMS IN INDIAN BANKING
4.1 GROWTH OF BANKING SYSTEM IN INDIA : In order to understand present make up of banking sector in India and its past progress, it will be fitness of things to look at its development in a somewhat longer historical perspective. The past four decades and particularly the last two decades witnessed cataclysmic change in the face of commercial banking all over the world. Indian banking system has also followed the same trend. In over five decades since dependence, banking system in India has passed through five distinct phase, viz. (1) Evolutionary Phase (prior to 1950) (2) Foundation phase (1950-1968) (3) Expansion phase (1968-1984) (4) Consolidation phase (1984-1990) (5) Reformatory phase (since 1990) 4.1.1 EVOLUTION PHASE: (PRIOR TO 1950) Enactment of the RBI Act 1935 gave birth to scheduled banks in India, and some of these banks had already been established around 1981. The prominent among the scheduled banks is the Allahabad Bank, which was set up in 1865 with European management. The first bank which was established with Indian ownership and management was the Oudh Commercial Bank, I formed in 1881, followed by the Ajodhya Bank in 1884, the Punjab National Bank in 1894 and Nedungadi Bank in 1899. Thus, there were five Banks in existence in the 19th century. During the period 1901-1914, twelve more banks were established, prominent among which were the Bank of Baroda (1906), the Canara Bank (1906), the Indian Bank (1907), the Bank of India (1908) and the Central Bank of India (1911).
Thus, the five big banks of today had come into being prior to the commencement of the First World War. In 1913, and also l in 1929, the Indian Bank faced serious crises. Several banks succumbed to these crises. Public confidence in banks received a jolt. There was a heavy rush on banks. An important point to be noted here is that no commercial bank was established during the First World War, while as many as twenty
DEVELOPMENT AND REFORMS IN INDIAN BANKING
4.1 GROWTH OF BANKING SYSTEM IN INDIA : In order to understand present make up of banking sector in India and its past progress, it will be fitness of things to look at its development in a somewhat longer historical perspective. The past four decades and particularly the last two decades witnessed cataclysmic change in the face of commercial banking all over the world. Indian banking system has also followed the same trend. In over five decades since dependence, banking system in India has passed through five distinct phase, viz. (1) Evolutionary Phase (prior to 1950) (2) Foundation phase (1950-1968) (3) Expansion phase (1968-1984) (4) Consolidation phase (1984-1990) (5) Reformatory phase (since 1990) 4.1.1 EVOLUTION PHASE: (PRIOR TO 1950) Enactment of the RBI Act 1935 gave birth to scheduled banks in India, and some of these banks had already been established around 1981. The prominent among the scheduled banks is the Allahabad Bank, which was set up in 1865 with European management. The first bank which was established with Indian ownership and management was the Oudh Commercial Bank, I formed in 1881, followed by the Ajodhya Bank in 1884, the Punjab National Bank in 1894 and Nedungadi Bank in 1899. Thus, there were five Banks in existence in the 19th century. During the period 1901-1914, twelve more banks were established, prominent among which were the Bank of Baroda (1906), the Canara Bank (1906), the Indian Bank (1907), the Bank of India (1908) and the Central Bank of India (1911).
Thus, the five big banks of today had come into being prior to the commencement of the First World War. In 1913, and also l in 1929, the Indian Bank faced serious crises. Several banks succumbed to these crises. Public confidence in banks received a jolt. There was a heavy rush on banks. An important point to be noted here is that no commercial bank was established during the First World War, while as many as twenty