Banking in India- Important Highlights of Banking Sector in India

Know the History of Banking System, Classification of banks and Functions of RBI


  • The first Bank of India with Limited Liability to be managed by Indian Board was Awadh Commercial Bank, established in 1881 at Faizabad. But it Failed in 1958.
  • The first bank purely managed by Indian was Punjab National Bank, established in Lahore in 1895. This bank not only survived till date but also is one of the largest banks in India.
  • The first Indian Commercial bank which was wholly owned by Indians was Central Bank of India, established in 1911.
  • The oldest public sector bank in India having branches all over India and serving the customers from last 145 years is Allahabad Bank. It is also known as one of India’soldest Joint Stock Bank.
  • The first major step was Nationalisation of the Imperial Bank of India in 1955 via State Bank of India Act. In a major process of Nationalisation, 7 subsidiaries of the State Bank of India were nationalised by Indira Gandhi regime. On 19th July, 1969, 14 major private commercial banks with a deposit base over Rs. 50 crores were nationalised.

Read more: Modern Indian History – An Introduction to the beginning of Modern History of India

  • In 1980 when government of India acquired the ownership of 6 more banks, thus bringing the total number of Nationalised Banks to 20.
  • Classification of Banks in India-
  • Public Sector Banks
  • Private Sector Banks
  • Co-operative Banks
  • Regional-Rural Banks
  • Foreign Banks
  • Reserve Bank of India (RBI)
  • The central bank of the country is the Reserve Bank of India
  • It was established in April 1935 with a share capital of Rs. 5 Crore on the basis of the recommendation of the Hilton Young Commission
  • The RBI commenced operation on April 1, 1935 under the Reserve Bank of India Act, 1934.
  • The Act (II of 1934) provided the statutory basis of the functioning of the Bank.
  • Functions of RBI-
  • To issue currency notes of all denominations
  • To act as the government’s banker, agent and advisor.
  • Acts as the bankers’ bank
  • Controller of credit, i.e. it has power to influence the volume of credit created by banks in India.
  • Custodian of foreign Reserves by maintaining the official rate of exchange.
  • Supervisory functions.

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