Banking System of India

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Banking System in India

Banking System of India

  • The first bank of Limited liability managed by an Indian was Oudh Commercial Bank in 1881.
  • The first purely Indian bank was the Punjab National Bank (1894).

Reserve Bank of India

  • It is the Central Bank of the country.
  • It was established on 1 April, 1935 with a capital of 5 crore.
  • It was nationalised on 1 January, 1949 as govt. acquired the private share holdings.


  • Issuing of Notes
  • Banker to the Government
  • Banker’s Bank
  • Controller of Credit
  • Custodian of Foreign Reserves
  • It formulates and administers the monetary policy.
  • Acts as the agent of the Government of India in respect to India’s membership of the IMF and the World Bank.

State Bank of India (SBI)

  • It was created in January, 1921 by amalgamation of 3 presidency banks.
  • After nationalisation in 1955, its name was changed to State Bank of India.
  • It is the biggest commercial bank in the public sector of India.
  • It has the largest number of branches (more than 13000) in the world.
  • State SBI has 7 subsidiaries.

Nationalisation of Banks

  • In order to have more control over the banks, 14 large commercial banks whose reserves were more than 50 crore each, were nationalised on 19 July, 1969. These banks were

1. The Central Bank of India
2. Bank of India
3. Punjab National Bank
4. Canara Bank
5. United Commercial Bank
6. Syndicate Bank
7. Bank of Baroda
8. United Bank of India
9. Union Bank of India
10. Dena Bank
11. Allahabad Bank
12. Indian Bank
13. Indian Overseas Bank
14. Bank of Maharashtra

  • On 15 April, 1980, those 6 private sector banks whose reserves were more than 200 crore each were nationalised. These banks were

1. Andhra Bank
2. Punjab and Sindh Bank
3. New Bank of India
4. Vijaya Bank
5. Corporation Bank
6. Oriental Bank of Commerce

  • In September 1993, the New Bank of India was merged with the Punjab National Bank.
  • These nationalised banks, together with Regional Rural Banks (RRBs), come under the category of Public Sector Commercial Banks. The other kind of commercial banks are Private Sector Commercial Banks.
  • At present there are 19 nationalised banks besides the RBI.


National Bank for Agriculture and Rural Development (NABARD) was set up in July, 1982 as the Apex Bank with a paid-up capital of 3 100 crore contributed equally by RBI and Government of India its headquater is at Mumbai.

The role of NABARD was to act as a refinance institution for all kind of production and investment credit to agriculture and village sector.

The paid-up capital of NABARD was raised to 5000 crore on 23rd, October 2011 by the govermment.

The RBI divestesd all of its stake from the NABARD to the government in October 2010. Now, 99% shares of NABARD is with the government.

Rural Infrastructure Development Fund (RIDF) was set up in 1995-96. under NABARD for holistic rural development

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