How is Banking Developing in India ?

Introduction

Financial intermediation has a long history in India. In 1770, the Bank of Hindustan was established as India’s first bank. The first effort to establish a central bank occurred in 1773. In terms of financial market development, India was also a forerunner. By the time India gained independence, it had a reasonably established commercial banking sector. In 1951, India had 566 private commercial banks with 4151 branches, the vast majority of which were concentrated in large towns and cities. The Reserve Bank of India (the Central Bank of India) was founded in 1935 as a shareholders’ institution, similar to the Bank of England. Since January 1, 1949, the Reserve Bank of India has been a state-owned entity. 

Description 

Prior to independence, there were about 600 banks in India. The first bank, known as the Bank of Hindustan, was formed in Calcutta in 1770. It was closed in 1832. In the history of Indian banking, the Oudh Commercial Bank was the country’s first commercial bank. Other nineteenth-century banks, such as Allahabad Bank (established in 1865) and Punjab National Bank (formed in 1894), have endured the test of time and are still in operation today.

Other banks created in the early to mid-1800s, such as the Bank of Bengal, Bank of Madras, and Bank of Bombay, were consolidated to form the Imperial Bank, which subsequently became the State Bank of India. Following independence, the evolution of India’s financial sector remained mostly unchanged. Under the Banking Regulation Act of 1949, the Government of India planned to nationalize banks in 1969. A total of 14 banks, including the Reserve Bank of India, were nationalized (RBI).

In 1975, the Indian government acknowledged that many communities were financially excluded. Between 1982 and 1990, it established banking organizations with specialized functions in response to the expansion of India’s financial services.

• NABARD (1982) – to aid agricultural activity.
• EXIM (1982) was established to encourage export and import.
• To finance housing developments, the National Housing Board was established.
• SIDBI – for the funding of small-scale industries

Types of Banking

As we conclude our examination of the growth of the Indian banking system, we should consider the many types of banking that exist in India today. They are as follows:

• Branch Banking
• Unit Banking
• Mixed Banking
• Chain Banking
• Retail Banking
• Wholesale Banking
• Relationship Banking
• Correspondent Banking
• Universal Banking
• Social Banking
• Virtual Banking
• Narrow Banking
• Islamic Banking
• Shadow Banking

Branch Banking: Branch banking is the practice of conducting banking transactions through branches.

Unit Banking: Unit banking is a financial system that emerged in the United States. It is a restricted banking model in which banks operate solely from a single branch (or a few branches in the same region) to serve the local community.

Mixed Banking Mixed banking is a system in which banks engage in both commercial and investment banking operations.

Chain Banking: A chain banking system is a sort of banking in which a group of people join forces to own and run three or more separately licensed banks.

Retail Banking: Retail banking is defined as banking in which all transactions are conducted directly with clients, and no transactions are conducted with other banks or organizations.

Correspondent Banking: Correspondent banking, which is practiced in over 200 countries, is a profitable way for banks to conduct business in other nations when they do not have a physical presence or have restricted operational permits.

Universal Banking: Universal banking is a financial system in which large banks provide a wide range of banking services such as commercial banking, investment banking, mutual funds, merchant banking, insurance, and so on.

Social Banking: Social banking is a notion in which banking services are geared toward the general welfare and financial inclusion of the poor and disadvantaged parts of society.

Virtual Banking: It implies conducting all banking transactions online.

Narrow Banking: It includes investing a significant portion of the deposits in risk-free assets such as government securities.

Shadow Banking: It refers to all non-bank financial intermediaries that offer services similar to regular commercial banks.

Banking

The banking business manages a country’s finances, including cash and credit. Banks are the institutional structures that take deposits and issue a credit to entities, and they play an important part in a country’s economic standing. Banks are strictly regulated in most nations due to their role in the economy. In India, the Reserve Bank of India (RBI) is the primary financial organization in charge of the country’s monetary policy.

• Personal Loan
• Vehicle Loan
• Home loan
• Business Loan
• Gold Loan
• Saving/Current account
• Fixed deposit
• Internet/Mobile Banking
• Customer Care
• Credit/Debit Cards

Indian Banking Structure

A bank is a financial institution that offers consumers banking and other financial services. A bank is commonly defined as an institution that performs basic financial services such as receiving deposits and making loans. Nonbanking institutions also provide certain banking services while not matching the legal criteria of a bank. Banks are one sort of financial services firm.

The Indian banking business is separated into two sectors: organized and unorganized. The organized sector includes the Reserve Bank of India, commercial banks and cooperative banks, and specialized financial institutions (IDBI, ICICI, IFC, etc.).

Conclusion

Banks play significant roles in the economic growth of nations since they regulate the flow of money in circulation and are the primary stimulus of economic advancement. Economic development is a dynamic and ongoing process that is largely dependent on resource mobilization, investment, and the operational efficiency of the many sectors of the economy.