Evolution Of Banking Sector

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CHAPTER II
THE POLYMORPHOUS EVOLUTION OF INDIAN BANKING SYSTEM

2.1 INTRODUCTION
It is undeniably said that the system of banking forms the bedrock of all development and concoction of the present day world. The multi dimensional nature of banking system makes it indispensible for a modern economy. Former Governor of Reserve Bank of India Dr. D Subharoa articulated, “Growth to which the poor contribute and growth from which the poor benefit”, for which the banking system in an economy plays an appreciable role. The banking system is no more immured to its traditional role of financial intermediation by accepting deposits and lending to the needy. A healthy banking sector denotes a sound economy. Banking has abetted in developing the integral
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This helps to reach banking services to different locations and is easier for customers as it has the features of large banks. The bank exists even if the other branches fail.
2.3.2 Unit banking
Unit banking refers to bank that is single, independent and does not have any connecting banks. Such banking units easily fail when an economic turmoil happens. Unit banking possesses the advantages of time saving in decision making and cost saving in supervision. The profit need not be shared among the branches, thus can be used for own development. But being a single unit, specialization is not possible and there possess high risk due to lack of diversification of assets and deposits.
2.3.3 Chain banking
It is a situation in which three or more banks that are independently chartered are controlled by a small group of people.
2.3.4 Group banking
A plan offered by banks designed to be used by groups rather than individuals.
2:4 EVOLUTION OF INDIAN BANKING
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The commercial banking activities began with the establishment of Bank of Hindustan in 1770, which is the first joint stock company in India. But this was liquidated in 1832. In 1806, the Bank of Bengal was established followed by the establishment of Bank of Bombay and Bank of Madras in 1840 and 1843 respectively. These three banks together known as Presidency banks and was given right to issue notes in the region. During this time, many banks emerged but failed due to speculation, mismanagement and fraudulent practices. In between 1865 and 1870, only one bank emerged out, that is, Allahabad Bank Ltd. In 1881, The Oudh Commercial Bank was established, which is the first purely Indian bank. By the beginning of 1900, due to influence of Swadeshi movement, the number of banks increased. There were only 8 banks during 1870 with total deposit of Rs 1263 lakhs, but this has increased to 20 in 1900 with a deposit amount of Rs 3427 lakhs. India witnessed the emergence of a number of joint stock banks during 1906 to 1913. By 1920, there were 76 banks with a total deposit of Rs 23458 lakh. The major banks include the people’s bank of India Ltd, The Bank of India Ltd, The Central Bank of India Ltd, the Bank of Baroda etc. in 1947, the number has hiked to 656 with Rs. 117768 lakhs of deposit amount (table 2.1). If the branch distribution is examined,

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