BANKING SYSTEM IN INDIA- AN OVERVIEW
What is Banking?
It may be defined as the business activity of accepting and safeguarding money owned by other individuals and entities, and then lending out this money in order to earn a profit.
What is Bank?
It refers to a financial institution that undertakes the banking activity such as, accepts deposits and lend the same to earn certain profits.
History of Banking in India
In modern sense, Banking originated in the last decade of 18th century. For orderly understanding take it as sequence:
- The Bank of Hindustan was among the first established in 1770 and liquidated in 1829-32.
- The largest and oldest bank still in existence is the State Bank of India. The three banks named Bank of Bengal, Bank of Bombay and Bank of Madras were merged in 1921 from the Imperial Bank of India became the State Bank of India in 1955.
- Reserve bank of India was established in 1935, under the Reserve Bank of India Act, 1934.
- Nationalization in 1969- The Indian government nationalized 14 major private banks (commercial banks) in 1969. Later in 1980, 6 more private banks were nationalized. Later on, in 1993, the government merged New Bank of India with Punjab National Bank and it was the only merger between nationalized banks. As a result, nationalized banks reduced from 20 to 19.
- The largest consolidation exercise in banking history of India be effective from 1 April, 2017.
- SBI merger- Five associate banks, state bank of Bikaner & Jaipur, state bank of Hyderabad, state bank of Mysore, state bank of Patiala and state bank of Travancore merged in SBI under SBI Act, 1955. Others two state bank of saurashtra and state bank of Indore got merged in 2008 and 2010. Apart from these Bhartiya Mahila Bank also merged with SBI.
- Latest Bank Merger in India– The government of India consolidated 10 Public Sector Banks into 4 banks. The announcement of this mega-merger was made by Union Finance Minister Nirmala Sitharaman in 2019. However, RBI notified it in late March through its circular to merge banks in the new financial year (1st April 2020). As per the finance minister, the merger would help to manage the capital more efficiently. The amalgamation of the PSBs is based on bad loan intensity and regional factors.
Punjab National Bank (PNB) has taken over the Oriental Bank of Commerce and the United Bank of India as an anchor bank, Canara Bank has taken over Syndicate Bank, Union Bank of India itself has taken over Andhra Bank and Corporation Bank. and Indian Bank will take over the Allahabad bank. Earlier, State Bank of India with five of its associate banks while Vijaya Bank and Dena bank were merged with Bank of Baroda.
Acquire Bank Amalgamated bank Acquisition Year Indian Bank Allahabad Bank 1-Apr-20 Punjab National Bank Oriental Bank of Commerce 1-Apr-20 Punjab National Bank United Bank 1-Apr-20 Union Bank of India Andhra Bank 1-Apr-20 Union Bank of India Corporation Bank 1-Apr-20 Canara Bank Syndicate Bank 1-Apr-20
After this merger, the country is having a total of 12 public sector banks, including the State Bank of India and Bank of Baroda. This results in seven large public sector banks and five smaller ones. There were as many as 27 PSBs in 2017. Below is list of Nationalized Banks in India 2021 After Merger
- State Bank of India
- Bank of Baroda
- Punjab National Bank
- Canara Bank
- Union Bank of India
- Indian Bank
- Indian Overseas Bank
- UCO Bank
- Bank of Maharashtra
- Punjab and Sind Bank
- Central Bank of India
- Bank of India
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