Q: Write the various steps of evolution of banking in India ? Explain the nature, development and History of Bank ?

Ans: The banking system is considered almost as old as civilization and has existed in varied forms, and the banking system in India is no exception to that. Before we deep dive into the evolution of banking in India, let’s take a look at the banking scene in the world. Here’s a short video that captures the evolutionary process of banking, with a few pre-historic and mythological elements thrown in as a homage to our curious and imaginative ancestors.

The banking system of a country upholds its economic development. Considering the economic condition of people, the need for financial services and the advancements in technology that followed, the banking sector in India has gone through major transformations over the past five centuries. There you must understand the different types of banking systems in India.

It’s interesting to track the history of the banking system in India.  

The history of banking in India can be broadly classified as:

Pre-independence Phase (1770-1947)

Post-independence Phase (1947-till date): To understand this phase better, we’ll break it down further into:

Pre-nationalisation Phase (1947-1969)

Post-nationalisation Phase (1969-1991)

Liberalisation Phase (1991-till date)

Pre independent Phase: 

It is one of the most important phases of the history of banking in India. Post-independence, the evolution of the Indian banking system continued when the Government of India (GOI) adopted the approach of a mixed economy in 1948 with extensive intervention in markets to strengthen the economy. The Reserve Bank of India (est. 1935) was nationalised in 1949, and it was empowered to regulate, control, and inspect all banks in India.

Post independent Phase:

It is one of the most important phases of the history of banking in India. Post-independence, the evolution of the Indian banking system continued when the Government of India (GOI) adopted the approach of a mixed economy in 1948 with extensive intervention in markets to strengthen the economy. The Reserve Bank of India (est. 1935) was nationalised in 1949, and it was empowered to regulate, control, and inspect all banks in India.

The second wave of Nationalisation followed in 1980 with 6 more commercial banks, which later became an integral part of the history of banking in India.

In 1991, the GOI adopted economic liberalisation that brought about a massive change in its economic policies to enhance the participation of private and international investments.

The banking system in India aims to offer confidence and security in the economy. The banking system manages the flow of money between businesses and people. Following are some of the major functions of the banking system in India. 

 

Accept deposits of money.

Provide money withdrawals

Provide different types of banking accounts

Offer different types of loans

Support customers

Offer Credit cards

Offer Debit cards

Provide Fund remittance

Provide Bill payment facility

Offer Internet banking

A few of the advantages of banks are:

 

Security of money

Inculcating a habit of saving money

Ease of money transfer

Ease of bill payments

Ease of international transactions