June 2, 1806: The Bank of Calcutta established.
January 2, 1809: redesigned as Bank of Bengal
April 15, 1840: Bank of Bombay established.
July 1, 1843: Bank of Madras established.
1861: Paper Currency Act passed
January 27, 1921: all 3 banks amalgamated to form Imperial
Bank of India
July 1, 1955: State Bank of India formed
The early history of Indian banking and finance was marked
governmental regulation and control. The roots of the national
system were in the State Bank of India Act of 1955, which
nationalized the former Imperial Bank of India and its seven
associate banks. In the early days, this national system operated
along side of a large private banking system. However, in
two acts of nationalization in 1969 and 1980, the government
nationalized the largest private sector banks in order to
bring the bulk of the banking system under direct governmental
control. Following the nationalizations in 1969 & 1980,
the governmental banks share of bank assets jumped from
31% to 92%.
(ICRA pg 5) The objective of this strong national influence
was to make the banks
public instruments of development with the government having
control over where and how funds were raised and lent.
The result of the national control of the banks was a gradual
productivity and a rise in nonperforming assets. Banks were
limited in their operational flexibility by the governments
desire to maintain employment in the banking system and were
often drawn into troublesome loans in order to further the
governments social goals. In 1991, the problems in the
system reached a critical breaking point and the government
asimbam to examine the problems and recommend changes. This
commissions report was the basis of the reforms that took
place during the 1990s and early 2000s.
Over the past 15 years, the Indian financial system has seen
Interest Rates have been largely deregulated, new banks have
been allowed to enter the market and competition has been
allowed across a variety of different product lines including
loans, insurance, credit card, mutual funds and corporate