HISTORY OF BANKING
HISTORY OF BANKING
The idea of banks began as long ago as 1,800 BC in Babylon, a city in present day Iraq. In those days wealthy persons acted as moneylenders and made loans to people.
Beginning of formal banking can be traced to the functioning of money lenders in 12th and 13th centuries in the Italian towns of Florence and Genoa. In the 16th century, a German family called the Fuggers from Augsburg became prominent bankers.
At the end of the 17th century, England suffered heavy losses in war with France. So in 1694, a group of wealthy persons got together to form the Bank of England to provide loan to the government. The Bank of Scotland was founded in 1695.
In 1833, bank notes issued by the Bank of England were made legal tender i.e. they must be accepted as a valid means of payment. Modern banks began with the Bank Charter Act of 1844.
Chartered Bank of India opened its branches in Mumbai and Calcutta in 1858.
THE INDIAN SCENARIO
The existence of banking in India could be traced to the 500 BC. Chanakya’s Arthashastra, dating back to 400 BC contains references to creditors, lenders and lending rates.
Beginning of formal banking in India dates back to opening of Bank of Bombay in 1720 in Mumbai. It was followed by Bank of Hindustan in 1770 in Kolkata.
Structured professional banking with government support began in June 1806 with the opening of the Bank of Bengal, first ‘Presidency Bank’ in Calcutta.
Later, two more Presidency Banks were opened – Bank of Bombay in 1840 and Bank of Madras in 1843. In 1921, these three presidency banks were merged to form Imperial Bank of India.
The first Indian owned bank was the Allahabad Bank set up in Allahabad in 1865, followed by the Punjab National Bank in 1895 in Lahore.
The following are some major milestones in the field of banking in India:
1935: Establishment of Reserve Bank of India.
1949: Enactment of Banking Regulation Act.
1955: Nationalisation of Imperial Bank into State Bank of India.
1969: Nationalisation of 14 major Banks.
1975: Creation of Regional Rural Banks.
1980: Nationalisation of six banks with deposits of over 200 Crores.
1988: Beginning of computerization in banks
1992: Introduction of NPA system
1994: Entry of private tech savvy banks, ATMs
2000: Dawn of online banking
2009: Incorporation of NPCI for retail payment systems
2010: Connectivity of ATMs
2004/05: Beginning of RTGS/NEFT
2015: Opening of Payment Banks and Small Finance Banks