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Modern banking in India originated in the mid of 18th century. Among the first
bank A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Becau ...
s were the
Bank of Hindustan of Hindostan (1770–1832), a now defunct bank, is considered as among the first modern banks in Colonial India. History It was established by the agency house of Alexander and Company. The Bank lived through three economic crises of ...
, which was established in 1770 and liquidated in 1829–32; and the
General Bank of India The General Bank of India was a bank founded in the 18th century and lasted till 1791. History The Bank was the List of oldest banks in India, sixth oldest bank in India. In the 18th century, Calcutta had become a centre of trade and commer ...
, established in 1786 but failed in 1791. The largest and the oldest bank which is still in existence is the
State Bank of India State Bank of India (SBI) is an Indian multinational public sector bank and financial services statutory body headquartered in Mumbai, Maharashtra. SBI is the 49th largest bank in the world by total assets and ranked 221st in the '' Fort ...
(SBI). It originated and started working as the Bank of Calcutta in mid-June 1806. In 1809, it was renamed as the
Bank of Bengal The Bank of Calcutta (a precursor to the present State Bank of India) was founded on 2 June 1806, mainly to fund General Wellesley's wars against Tipu Sultan and the Marathas. It was the first bank of India and was renamed Bank of Bengal on ...
. This was one of the three banks founded by a presidency government, the other two were the Bank of Bombay in 1840 and the Bank of Madras in 1843. The three banks were merged in 1921 to form the Imperial Bank of India, which upon India's independence, became the
State Bank of India State Bank of India (SBI) is an Indian multinational public sector bank and financial services statutory body headquartered in Mumbai, Maharashtra. SBI is the 49th largest bank in the world by total assets and ranked 221st in the '' Fort ...
in 1955. For many years, the presidency banks had acted as quasi-central banks, as did their successors, until the
Reserve Bank of India The Reserve Bank of India, chiefly known as RBI, is India's central bank and regulatory body responsible for regulation of the Indian banking system. It is under the ownership of Ministry of Finance, Government of India. It is responsible f ...
was established in 1935, under the Reserve Bank of India Act, 1934. In 1960, the State Banks of India was given control of eight state-associated banks under the State Bank of India (Subsidiary Banks) Act, 1959. However the merger of these associated banks with SBI went into effect on 1 April 2017. In 1969, the
Government of India The Government of India ( ISO: ; often abbreviated as GoI), known as the Union Government or Central Government but often simply as the Centre, is the national government of the Republic of India, a federal democracy located in South Asia, ...
nationalised Nationalization (nationalisation in British English) is the process of transforming privately-owned assets into public assets by bringing them under the public ownership of a national government or state. Nationalization usually refers to pri ...
14 major private banks; one of the big banks was Bank of India. In 1980, 6 more private banks were nationalised. These nationalised banks are the majority of lenders in the Indian economy. They dominate the banking sector because of their large size and widespread networks. The Indian banking sector is broadly classified into
scheduled A schedule or a timetable, as a basic time-management tool, consists of a list of times at which possible tasks, events, or actions are intended to take place, or of a sequence of events in the chronological order in which such things are i ...
and non-scheduled banks. The scheduled banks are those included under the 2nd Schedule of the Reserve Bank of India Act, 1934. The scheduled banks are further classified into: nationalised banks;
State Bank of India State Bank of India (SBI) is an Indian multinational public sector bank and financial services statutory body headquartered in Mumbai, Maharashtra. SBI is the 49th largest bank in the world by total assets and ranked 221st in the '' Fort ...
and its associates; Regional Rural Banks (RRBs); foreign banks; and other Indian private sector banks. The SBI has merged its Associate banks into itself to create the largest Bank in India on 1 April 2017. With this merger SBI has a global ranking of 236 on Fortune 500 index. The term commercial banks refers to both scheduled and non-scheduled commercial banks regulated under the Banking Regulation Act, 1949. Generally the supply, product range and reach of banking in India is fairly mature-even though reach in rural India and to the poor still remains a challenge. The government has developed initiatives to address this through the State Bank of India expanding its branch network and through the National Bank for Agriculture and Rural Development (NABARD) with facilities like microfinance.


History


Ancient India

The
Vedas upright=1.2, The Vedas are ancient Sanskrit texts of Hinduism. Above: A page from the '' Atharvaveda''. The Vedas (, , ) are a large body of religious texts originating in ancient India. Composed in Vedic Sanskrit, the texts constitute th ...
are the ancient Indian texts mention the concept of usury, with the word ''kusidin'' translated as "usurer". The
Sutra ''Sutra'' ( sa, सूत्र, translit=sūtra, translit-std=IAST, translation=string, thread)Monier Williams, ''Sanskrit English Dictionary'', Oxford University Press, Entry fo''sutra'' page 1241 in Indian literary traditions refers to an a ...
s (700–100 BCE) and the Jatakas (600–400 BCE) also mention usury. Texts of this period also condemned usury: Vasishtha forbade
Brahmin Brahmin (; sa, ब्राह्मण, brāhmaṇa) is a varna as well as a caste within Hindu society. The Brahmins are designated as the priestly class as they serve as priests ( purohit, pandit, or pujari) and religious teachers ( ...
and Kshatriya varnas from participating in usury. By the 2nd century CE, usury became more acceptable. The Manusmriti considered usury an acceptable means of acquiring wealth or leading a livelihood. It also considered money lending above a certain rate and different ceiling rates for different castes a grave sin. The Jatakas, Dharmashastras and Kautilya also mention the existence of loan
deed In common law, a deed is any legal instrument in writing which passes, affirms or confirms an interest, right, or property and that is signed, attested, delivered, and in some jurisdictions, sealed. It is commonly associated with transferrin ...
s, called ''rnapatra'', ''rnapanna'', or ''rnalekhaya.'' Later during the
Mauryan period The Maurya Empire, or the Mauryan Empire, was a geographically extensive Iron Age historical power in the Indian subcontinent based in Magadha, having been founded by Chandragupta Maurya in 322 BCE, and existing in loose-knit fashion until 1 ...
(321–185 BCE), an instrument called '' adesha'' was in use, which was an order on a banker directing him to pay the sum on the note to a third person, which corresponds to the definition of a modern
bill of exchange A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time, whose payer is usually named on the document. More specifically, it is a document contemplated by or consisting of a ...
. The considerable use of these instruments has been recorded. In large towns, merchants also gave letters of credit to one another.


Medieval Period

The use of loan deeds continued into the Mughal era and were called ''dastawez'' (in Urdu/Hindi). Two types of loans deeds have been recorded. The ''dastawez-e-indultalab'' was payable on demand and ''dastawez-e-miadi'' was payable after a stipulated time. The use of payment directives by royal treasuries, called ''barattes'', have been also recorded. There are also records of Indian bankers using issuing bills of exchange on foreign countries. The evolution of '' hundis'', a type of credit instrument, also occurred during this period and remain in use.


Colonial era

During the period of British rule merchants established the Union Bank of Calcutta in 1829, first as a private joint stock association, then partnership. Its proprietors were the owners of the earlier Commercial Bank and the Calcutta Bank, who by mutual consent created Union Bank to replace these two banks. In 1840 it established an agency at Singapore, and closed the one at Mirzapore that it had opened in the previous year. Also in 1840 the Bank revealed that it had been the subject of a fraud by the bank's accountant. Union Bank was incorporated in 1845 but failed in 1848, having been insolvent for some time and having used new money from depositors to pay its dividends. The Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint Stock bank in India, it was not the first though. That honour belongs to the Bank of Upper India, which was established in 1863 and survived until 1913, when it failed, with some of its assets and liabilities being transferred to the Alliance Bank of Simla. Foreign banks too started to appear, particularly in
Calcutta Kolkata (, or , ; also known as Calcutta , the official name until 2001) is the capital of the Indian state of West Bengal, on the eastern bank of the Hooghly River west of the border with Bangladesh. It is the primary business, comm ...
, in the 1860s. Grindlays Bank opened its first branch in
Calcutta Kolkata (, or , ; also known as Calcutta , the official name until 2001) is the capital of the Indian state of West Bengal, on the eastern bank of the Hooghly River west of the border with Bangladesh. It is the primary business, comm ...
in 1864. The Comptoir d'Escompte de Paris opened a branch in Calcutta in 1860, and another in
Bombay Mumbai (, ; also known as Bombay — the official name until 1995) is the capital city of the Indian state of Maharashtra and the '' de facto'' financial centre of India. According to the United Nations, as of 2018, Mumbai is the sec ...
in 1862; branches followed in
Madras Chennai (, ), formerly known as Madras (List of renamed Indian cities and states#Tamil Nadu, the official name until 1996), is the capital city of Tamil Nadu, the southernmost states and territories of India, Indian state. The largest city ...
and
Pondicherry Pondicherry (), now known as Puducherry ( French: Pondichéry ʊdʊˈtʃɛɹi(listen), on-dicherry, is the capital and the most populous city of the Union Territory of Puducherry in India. The city is in the Puducherry district on the sout ...
, then a French possession. HSBC established itself in
Bengal Bengal ( ; bn, বাংলা/বঙ্গ, translit=Bānglā/Bôngô, ) is a geopolitical, cultural and historical region in South Asia, specifically in the eastern part of the Indian subcontinent at the apex of the Bay of Bengal, predom ...
in 1869. Calcutta was the most active trading port in India, mainly due to the trade of the
British Empire The British Empire was composed of the dominions, colonies, protectorates, mandates, and other territories ruled or administered by the United Kingdom and its predecessor states. It began with the overseas possessions and trading post ...
, and so became a banking centre. The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881 in
Faizabad Faizabad (Hindustani pronunciation: ɛːzaːbaːd is a city situated near the southern banks of Saryu river in Ayodhya district in the Indian state of Uttar Pradesh. The area of this Faizabad region is administered by Ayodhya Municipal Co ...
. It failed in 1958. The next was the
Punjab National Bank Punjab National Bank (abbreviated as PNB) is an Indian public sector bank headquartered in Delhi. The bank was founded in May 1894 and is the second largest government-owned bank in India, both in terms of its business volumes and its network ...
, established in
Lahore Lahore ( ; pnb, ; ur, ) is the second most populous city in Pakistan after Karachi and 26th most populous city in the world, with a population of over 13 million. It is the capital of the province of Punjab where it is the largest ...
in 1894, which has survived to the present and is now one of the largest banks in India. Around the turn of the 20th century, the Indian economy was passing through a relative period of stability. Around five decades had elapsed since the
Indian rebellion The Indian Rebellion of 1857 was a major uprising in India in 1857–58 against the rule of the British East India Company, which functioned as a sovereign power on behalf of the British Crown. The rebellion began on 10 May 1857 in the for ...
, and the social, industrial and other infrastructure had improved. Indians had established small banks, most of which served particular ethnic and religious communities. The presidency banks dominated banking in India but there were also some exchange banks and a number of Indian
joint stock A joint-stock company is a business entity in which shares of the company's stock can be bought and sold by shareholders. Each shareholder owns company stock in proportion, evidenced by their shares (certificates of ownership). Shareholders are ...
banks. All these banks operated in different segments of the economy. The exchange banks, mostly owned by Europeans, concentrated on financing foreign trade. Indian joint stock banks were generally under capitalised and lacked the experience and maturity to compete with the presidency and exchange banks. This segmentation let Lord Curzon to observe, "In respect of banking it seems we are behind the times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome compartments." The period between 1906 and 1911 saw the establishment of banks inspired by the Swadeshi movement. The Swadeshi movement inspired local businessmen and political figures to found banks of and for the Indian community. A number of banks established then have survived to the present such as Catholic Syrian Bank, The South Indian Bank, Bank of India,
Corporation Bank Corporation Bank was a public-sector banking company headquartered in Mangalore, India. The bank had a pan-Indian presence. Presently, the bank has a network of 2,432 fully automated CBS branches, 3,040 ATMs, and 4,724 branchless banking uni ...
, Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India. The fervour of Swadeshi movement led to the establishment of many private banks in Dakshina Kannada and Udupi district, which were unified earlier and known by the name South Canara (South Kanara) district. Four nationalised banks started in this district and also a leading private sector bank. Hence undivided Dakshina Kannada district is known as "Cradle of Indian Banking". The inaugural officeholder was the Britisher Sir Osborne Smith(1 April 1935), while C. D. Deshmukh(11 August 1943) was the first Indian governor. On 12 December 2018,Shaktikanta Das, who was the finance secretary with the Government of India, begins his journey as the new RBI Governor, taking charge from Urjit R Patel. During the
First World War World War I (28 July 1914 11 November 1918), often abbreviated as WWI, was one of the deadliest global conflicts in history. Belligerents included much of Europe, the Russian Empire, the United States, and the Ottoman Empire, with fig ...
(1914–1918) through the end of the
Second World War World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the World War II by country, vast majority of the world's countries—including all of the great power ...
(1939–1945), and two years thereafter until the
independence Independence is a condition of a person, nation, country, or state in which residents and population, or some portion thereof, exercise self-government, and usually sovereignty, over its territory. The opposite of independence is the s ...
of India were challenging for Indian banking. The years of the First World War were turbulent, and it took its toll with banks simply collapsing despite the Indian economy gaining indirect boost due to war-related economic activities. At least 94 banks in India failed between 1913 and 1918 as indicated in the following table:


Post-Independence

During 1938–46, bank branch offices trebled to 3,469 and deposits quadrupled to 962 crore. Nevertheless, the
partition of India The Partition of British India in 1947 was the Partition (politics), change of political borders and the division of other assets that accompanied the dissolution of the British Raj in South Asia and the creation of two independent dominions: ...
in 1947 adversely impacted the economies of
Punjab Punjab (; Punjabi: پنجاب ; ਪੰਜਾਬ ; ; also romanised as ''Panjāb'' or ''Panj-Āb'') is a geopolitical, cultural, and historical region in South Asia, specifically in the northern part of the Indian subcontinent, comprising ...
and
West Bengal West Bengal (, Bengali: ''Poshchim Bongo'', , abbr. WB) is a state in the eastern portion of India. It is situated along the Bay of Bengal, along with a population of over 91 million inhabitants within an area of . West Bengal is the four ...
, paralysing banking activities for months. India's
independence Independence is a condition of a person, nation, country, or state in which residents and population, or some portion thereof, exercise self-government, and usually sovereignty, over its territory. The opposite of independence is the s ...
marked the end of a regime of the
Laissez-faire ''Laissez-faire'' ( ; from french: laissez faire , ) is an economic system in which transactions between private groups of people are free from any form of economic interventionism (such as subsidies) deriving from special interest groups. ...
for the Indian banking. The
Government of India The Government of India ( ISO: ; often abbreviated as GoI), known as the Union Government or Central Government but often simply as the Centre, is the national government of the Republic of India, a federal democracy located in South Asia, ...
initiated measures to play an active role in the economic life of the nation, and the Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed economy. This resulted in greater involvement of the state in different segments of the economy including banking and finance. The major steps to regulate banking included: * The
Reserve Bank of India The Reserve Bank of India, chiefly known as RBI, is India's central bank and regulatory body responsible for regulation of the Indian banking system. It is under the ownership of Ministry of Finance, Government of India. It is responsible f ...
, India's central banking authority, was established in April 1935, but was nationalized on 1 January 1949 under the terms of the Reserve Bank of India (Transfer to Public Ownership) Act, 1948 (RBI, 2005b). * In 1949, the Banking Regulation Act was enacted, which empowered the
Reserve Bank of India The Reserve Bank of India, chiefly known as RBI, is India's central bank and regulatory body responsible for regulation of the Indian banking system. It is under the ownership of Ministry of Finance, Government of India. It is responsible f ...
(RBI) to regulate, control, and inspect the banks in India. * The Banking Regulation Act also provided that no new bank or branch of an existing bank could be opened without a license from the RBI, and no two banks could have common directors.


Nationalisation in 1969

Despite the provisions, control and regulations of the
Reserve Bank of India The Reserve Bank of India, chiefly known as RBI, is India's central bank and regulatory body responsible for regulation of the Indian banking system. It is under the ownership of Ministry of Finance, Government of India. It is responsible f ...
, banks in India except the
State Bank of India State Bank of India (SBI) is an Indian multinational public sector bank and financial services statutory body headquartered in Mumbai, Maharashtra. SBI is the 49th largest bank in the world by total assets and ranked 221st in the '' Fort ...
(SBI), remain owned and operated by private persons. By the 1960s, the Indian banking industry had become an important tool to facilitate the development of the Indian economy. At the same time, it had emerged as a large employer, and a debate had ensued about the nationalization of the banking industry. Indira Gandhi, the then
Prime Minister of India The prime minister of India ( IAST: ) is the head of government of the Republic of India. Executive authority is vested in the prime minister and their chosen Council of Ministers, despite the president of India being the nominal head of th ...
, expressed the intention of the
Government of India The Government of India ( ISO: ; often abbreviated as GoI), known as the Union Government or Central Government but often simply as the Centre, is the national government of the Republic of India, a federal democracy located in South Asia, ...
in the annual conference of the All India Congress Meeting in a paper entitled ''Stray thoughts on Bank Nationalization.'' Thereafter, the Government of India issued the Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, 1969 and
nationalized Nationalization (nationalisation in British English) is the process of transforming privately-owned assets into public assets by bringing them under the public ownership of a national government or state. Nationalization usually refers to priv ...
the 14 largest commercial banks with effect from the midnight of 19 July 1969. These banks contained 85 percent of bank deposits in the country. Within two weeks of the issue of the ordinance, the
Parliament In modern politics, and history, a parliament is a legislative body of government. Generally, a modern parliament has three functions: representing the electorate, making laws, and overseeing the government via hearings and inquiries. ...
passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received
presidential President most commonly refers to: *President (corporate title) *President (education), a leader of a college or university * President (government title) President may also refer to: Automobiles * Nissan President, a 1966–2010 Japanese fu ...
approval on 9 August 1969. The following banks were nationalized in 1969: * Allahabad Bank (now Indian Bank) * Bank of Baroda * Bank of India * Bank of Maharashtra * Central Bank of India * Canara Bank * Dena Bank (now Bank of Baroda) * Indian Bank * Indian Overseas Bank *
Punjab National Bank Punjab National Bank (abbreviated as PNB) is an Indian public sector bank headquartered in Delhi. The bank was founded in May 1894 and is the second largest government-owned bank in India, both in terms of its business volumes and its network ...
* Syndicate Bank (now Canara Bank) * UCO Bank * Union Bank of India * United Bank of India( now Punjab National Bank)


Nationalisation in 1980

A second round of nationalizations of six more commercial banks followed in 1980. The stated reason for the nationalization was to give the government more control of credit delivery. With the second round of nationalizations, the Government of India controlled around 91% of the banking business of India. The following banks were nationalized in 1980: *Punjab and Sind Bank *Vijaya Bank (Now Bank of Baroda) *Oriental Bank of Commerce (now Punjab National Bank) *Corporation Bank (now Union Bank of India) *Andhra Bank (now Union Bank of India) *New Bank of India (now Punjab National Bank) Later on, in the year 1993, the government merged
New Bank of India New Bank of India was established in 1936, in Lahore by Mulk Raj Kohli, a professor of Economics turned banker. It moved its head office to Amritsar in 1947, and then to New Delhi in 1956. It acquired Didwana Industrial Bank in 1965, Chawla Ban ...
with
Punjab National Bank Punjab National Bank (abbreviated as PNB) is an Indian public sector bank headquartered in Delhi. The bank was founded in May 1894 and is the second largest government-owned bank in India, both in terms of its business volumes and its network ...
. It was, at that time, the only merger between nationalised banks and resulted in the reduction of their number from 20 to 19. Until the 1990s, the nationalized banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy.


Liberalisation in the 1990s

In the early 1990s, the then government embarked on a policy of liberalisation, licensing a small number of private banks. These came to be known as ''New Generation tech-savvy banks'', and included Global Trust Bank (the first of such new generation banks to be set up), which later amalgamated with Oriental Bank of Commerce, IndusInd Bank,
UTI Bank Axis Bank Limited, formerly known as UTI Bank (1993–2007), is an Indian banking and financial services company headquartered in Mumbai, Maharashtra. It sells financial services to large and mid-size companies, SMEs and retail businesses. As ...
(since renamed Axis Bank), ICICI Bank and HDFC Bank. This move – along with the rapid growth in the economy of India – revitalised the banking sector in India, which has seen rapid growth with strong contribution from all the three sectors of banks, namely, government banks, private banks and foreign banks. The next stage for the Indian banking has been set up, with proposed relaxation of norms for foreign direct investment. All foreign investors in banks may be given voting rights that could exceed the present cap of 10% at present. In 2019, Bandhan bank specifically, increased the foreign investment percentage limit to 49%. It has gone up to 74% with some restrictions. The new policy shook the banking sector in India completely. Bankers, till this time, were used to the 4–6–4 method (borrow at 4%; lend at 6%; go home at 4) of functioning. The new wave ushered in a modern outlook and tech-savvy methods of working for traditional banks. All this led to the retail boom in India. People demanded more from their banks and received more.


PSB Amalgamations in the 2000s and 2010s


SBI

SBI merged with its associate bank State Bank of Saurashtra in 2008 and State Bank of Indore in 2009. Following a merger process, the merger of the 5 remaining associate banks, (viz.
State Bank of Bikaner and Jaipur State Bank of Bikaner & Jaipur (SBBJ) was a major Indian bank. It was a subsidiary of State Bank of India, with which it was merged on 31 March 2017. As of 2015, SBBJ had 1,360 branches, mostly located in the state of Rajasthan, India. Its bran ...
, State Bank of Hyderabad, State Bank of Mysore,
State Bank of Patiala State Bank of Patiala, founded in 1917, was an associate bank of the State Bank Group. It merged with State Bank of India on 1 April 2017. At the time of its merger, State Bank of Patiala had a network of 1445 service outlets, including 1314 ...
, State Bank of Travancore); and the Bharatiya Mahila Bank) with the SBI was given an in-principle approval by the Union Cabinet on 15 June 2016. This came a month after the SBI board had, on 17 May 2016, cleared a proposal to merge its five associate banks and Bharatiya Mahila Bank with itself. On 15 February 2017, the Union Cabinet approved the merger of five associate banks with SBI. An analyst foresaw an initial negative impact as a result of different pension liability provisions and accounting policies for bad loans. The merger went into effect from 1 April 2017.


BOB

On 17 September 2018, the Government of India proposed the amalgamation of Dena Bank and Vijaya Bank with erstwhile Bank of Baroda, pending (namesake) approval from the boards of the three banks. The Union Cabinet and the boards of the banks approved with the merger on 2 January 2019. Under the terms of the amalgamation, Dena Bank and Vijaya Bank shareholders received 110 and 402 equity shares of the Bank of Baroda, respectively, of face value 2 for every 1,000 shares they held. The amalgamation became effective from 1 April 2019.


PNB

On 30 August 2019,
Finance Minister A finance minister is an executive or cabinet position in charge of one or more of government finances, economic policy and financial regulation. A finance minister's portfolio has a large variety of names around the world, such as "treasury", ...
announced that the Oriental Bank of Commerce and United Bank of India would be merged with
Punjab National Bank Punjab National Bank (abbreviated as PNB) is an Indian public sector bank headquartered in Delhi. The bank was founded in May 1894 and is the second largest government-owned bank in India, both in terms of its business volumes and its network ...
, making PNB the second largest PSB after SBI with assets of and 11,437 branches. MD and CEO of UBI, Ashok Kumar Pradhan, stated that the merged entity would begin functioning from 1 April 2020. The Union Cabinet approved the merger on 4 March 2020. PNB announced that its board had approved the merger ratios the next day. Shareholders of OBC and UBI will receive 1,150 shares and 121 shares of Punjab National Bank, respectively, for every 1,000 shares they hold. The merge came into effect since 1 April 2020. Post merger, Punjab National Bank has become the second largest public sector bank in India


Canara Bank

On 30 August 2019,
Finance Minister A finance minister is an executive or cabinet position in charge of one or more of government finances, economic policy and financial regulation. A finance minister's portfolio has a large variety of names around the world, such as "treasury", ...
announced that Syndicate Bank would be merged with Canara Bank. The proposal would create the fourth largest PSB trailing SBI, PNB, BoB with assets of and 10,324 branches. The Board of Directors of Canara Bank approved the merger on 13 September 2019. The Union Cabinet approved the merger on 4 March 2020. Canara Bank assumed control over Syndicate Bank on 1 April 2020 with Syndicate Bank shareholders receiving 158 equity shares in the former for every 1,000 shares they hold.


Union Bank of India

On 30 August 2019,
Finance Minister A finance minister is an executive or cabinet position in charge of one or more of government finances, economic policy and financial regulation. A finance minister's portfolio has a large variety of names around the world, such as "treasury", ...
announced that Andhra Bank and
Corporation Bank Corporation Bank was a public-sector banking company headquartered in Mangalore, India. The bank had a pan-Indian presence. Presently, the bank has a network of 2,432 fully automated CBS branches, 3,040 ATMs, and 4,724 branchless banking uni ...
would be merged into Union Bank of India. The proposal would make Union Bank of India the fifth largest PSB with assets of and 9,609 branches. The Board of Directors of Andhra Bank approved the merger on 13 September. The Union Cabinet approved the merger on 4 March, and it was completed on 1 April 2020.


Indian Bank

On 30 August 2019,
Finance Minister A finance minister is an executive or cabinet position in charge of one or more of government finances, economic policy and financial regulation. A finance minister's portfolio has a large variety of names around the world, such as "treasury", ...
announced that Allahabad Bank would be merged with Indian Bank. The proposal would create the seventh largest PSB in the country with assets of . The Union Cabinet approved the merger on 4 March 2020. Indian Bank assumed control of Allahabad Bank on 1 April 2020.


Rescue of private and co-operative banks (2020s)


Yes bank

In April 2020, RBI enlisted SBI to rescue the troubled lender Yes Bank, in the form of investment with assistance from other lenders viz., ICICI Bank, HDFC Bank and Kotak Mahindra Bank. SBI went on to own 48% share capital of Yes bank, which it later diluted to 30% in an FPO in the following months.


Lakshmi Vilas Bank

In November 2020, RBI asked
DBS Bank India DBS may refer to: Music groups *The dB's, a power pop band of the '70s and '80s *d.b.s., a Canadian punk rock band from 1992 to 2001 *Death by Stereo, an American heavy metal/punk rock group from California Companies and organizations Schools * ...
Limited (DBIL) to take over the operations of the private sector bank Lakshmi Vilas Bank whose net worth has turned negative, following mismanagement and two failed merger attempts with NBFCs. DBS India's then having just 12 branches benefited by LVB's 559 branches. In a first of a kind move, Tier- II bond holders have been asked by RBI to write off their holdings in LVB.


Punjab and Maharashtra Co-operative Bank

In January 2022, RBI asked Unity Small Finance Bank Limited (Unity SFB) to take over the operations of the private sector bank
Punjab and Maharashtra Co-operative Bank Punjab & Maharashtra Co-operative Bank Limited (PMC), is a multi-state co-operative bank that began operations in 1983. It has 137 branches spread over half a dozen states of India and nearly 100 branches are in Maharashtra. It is regulated by ...
(PMC), following mismanagement and one failed merger attempts with NBFC/ SFBs. Unity SFB then was being created by Centrum Finance and payment provider BharatPe to absorb the liabilities of the scam hit bank. In a first of a kind move, RBI allowed an established cooperative bank to merge into a then being created SFB.


Regional Rural banks revamp

With a new policy effected in late 2010, the RRBs which served a smaller locality spanning a few districts, were merged into a state level entity following the merger of nationalised banks and their equity in RRBs getting sequentially higher. This eliminated the existential competition and cooperation between RRB's and essentially making them a subsidiary bank of the promoter nationalised bank with state equity.


Current period

The Indian banking sector is broadly classified into scheduled banks and non-scheduled banks. All banks included in the Second Schedule to the Reserve Bank of India Act, 1934 are Scheduled Banks. These banks comprise Scheduled Commercial Banks and Scheduled Co-operative Banks. Scheduled Co-operative Banks consist of Scheduled State Co-operative Banks and Scheduled Urban Cooperative Banks. In the bank group-wise classification, IDBI Bank Ltd. is included in the category of other public sector bank. With the growth in the Indian economy expected to be strong for quite some time-especially in its services sector-the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong. One may also expect M&As, takeovers, and asset sales. In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak Mahindra Bank (a private sector bank) to 10%. This was the first time an investor was allowed to hold more than 5% in a private sector bank since the RBI announced norms in 2005 that any stake exceeding 5% in the private sector banks would need to be vetted by them. In recent years critics have charged that the non-government owned banks are too aggressive in their loan recovery efforts in connection with housing, vehicle and personal loans. There are press reports that the banks' loan recovery efforts have driven defaulting borrowers to suicide. By 2013 the Indian Banking Industry employed 1,175,149 employees and had a total of 109,811 branches in India and 171 branches abroad and manages an aggregate deposit of and
bank credit Credit (from Latin verb ''credit'', meaning "one believes") is the trust which allows one party to provide money or resources to another party wherein the second party does not reimburse the first party immediately (thereby generating a debt), ...
of . The net profit of the banks operating in India was against a turnover of for the financial year 2012–13. Pradhan Mantri Jan Dhan Yojana ( hi, प्रधानमंत्री जन धन योजना, en, Prime Minister's People Money Scheme) is a scheme for comprehensive financial inclusion launched by the
Prime Minister of India The prime minister of India ( IAST: ) is the head of government of the Republic of India. Executive authority is vested in the prime minister and their chosen Council of Ministers, despite the president of India being the nominal head of th ...
,
Narendra Modi Narendra Damodardas Modi (; born 17 September 1950) is an Indian politician serving as the List of Prime Ministers of India, 14th and current Prime Minister of India since 2014. Modi was the List of chief ministers of Gujarat, Chief Minist ...
, in 2014. Run by Department of Financial Services, Ministry of Finance, on the inauguration day, 1.5 Crore (15 million) bank accounts were opened under this scheme. By 15 July 2015, 16.92 crore accounts were opened, with around were deposited under the scheme, which also has an option for opening new bank accounts with zero balance.


Payment Banks

Payments bank Payments banks are new model of banks, conceptualised by the Reserve Bank of India (RBI), which cannot issue credit. These banks can accept a restricted deposit, which is currently limited to ₹200,000 per customer and may be increased further. ...
is a new model of banks conceptualized by the
Reserve Bank of India The Reserve Bank of India, chiefly known as RBI, is India's central bank and regulatory body responsible for regulation of the Indian banking system. It is under the ownership of Ministry of Finance, Government of India. It is responsible f ...
(RBI). These banks can accept a restricted deposit, which is currently limited to
The Indian rupee sign (₹) is the currency symbol for the Indian rupee (ISO 4217: INR), the official currency of India. Designed by D. Udaya Kumar, it was presented to the public by the Government of India on 15 July 2010, following its select ...
2 lakh per customer. These banks may not issue loans or credit cards, but may offer both current and savings accounts. Payments banks may issue ATM and debit cards, and offer net-banking and mobile-banking. The draft guidelines for licensing of payments banks in the private sector were formulated and released for public comments on 17 July 2014. The banks will be licensed as payments banks under Section 22 of the Banking Regulation Act, 1949, and will be registered as
public limited company A public limited company (legally abbreviated to PLC or plc) is a type of public company under United Kingdom company law, some Commonwealth jurisdictions, and the Republic of Ireland. It is a limited liability company whose shares may be fre ...
under the Companies Act, 2013.


Small finance banks

To further the objective of financial inclusion, the RBI granted approval in 2016 to ten entities to set up small finance banks. Since then, all ten have received the necessary licenses. A small finance bank is a niche type of bank to cater to the needs of people who traditionally have not used scheduled banks. Each of these banks is to open at least 25% of its branches in areas that do not have any other bank branches (unbanked regions). A small finance bank should hold 75% of its net credits in loans to firms in priority sector lending, and 50% of the loans in its portfolio must be less than lakh (US$,000).


Banking codes and standards

The Banking Codes and standards Board of India is an independent and autonomous banking industry body that monitors banks in India.To improve the quality of banking services in India S S Tarapore (former deputy governor of RBI) had the idea to form this committee.


Data Breaches


2016 Indian Banks data breach

A huge data breach on debit cards issued by various Indian banks was reported in October 2016. It was estimated 3.2 million debit cards were compromised. Major Indian banks- SBI, HDFC Bank, ICICI, Yes Bank and Axis Bank were among the worst hit. Many users reported unauthorised use of their cards in locations in China. This resulted in one of the India's biggest card replacement drive in banking history. The biggest Indian bank State Bank of India announced the blocking and replacement of almost 600,000 debit cards.


See also

*
History of banking The history of banking began with the first prototype banks, that is, the merchants of the world, who gave grain loans to farmers and traders who carried goods between cities. This was around 2000 Common Era, BCE in Assyria, India and Sumeria. La ...
* Institute of Banking Personnel Selection *
Indian Rupee The Indian rupee (symbol: ₹; code: INR) is the official currency in the republic of India. The rupee is subdivided into 100 '' paise'' (singular: ''paisa''), though as of 2022, coins of denomination of 1 rupee are the lowest value in use wher ...
* Private-sector banks in India * Public sector banks in India


References


Further reading

* Banking Frontiers magazine, being published since 2002 * ''The Evolution of the State Bank of India (The Era of the Imperial Bank of India, 1921–1955)'' (Volume III)


External links


Reserve Bank of IndiaIndian Banking Failure
{{India topics Banking