1. EVOLUTION OF BANKING
Vinodhini.R M.Com.,M.Phil.,MBA.,PGDCA.,

2. LADDER OF ECONOMIC
CIVILIZATION
STAGES IN RECIPROCAL EXCHANGE
 Barter Trade
 Commodity,metallic Money
 Symbolic Money
 Credit Money
 Credit Clearance

3. ORIGIN
The word ‘Bank’ has been derived from the Latin word ‘bancus’
or ‘banque’. The meaning of it in English is a bench. The early
bankers transacted their business at benches in a market place.
According to some authorities, the word bank was originally
derived from German word bank. It means a joint stock fund.
This word later on was called as ‘banco’ in Italy when a great
part of Italy was ruled by the Germans. Even it is evidenced that
the banking system was prevailing at the time of Babilon
culture. The banks were in existence in Rome also.

4. INTRODUCTION
 Banks have been around since the first
currency was formed.
 In the early days of ancient empires ,
temples were considered to be the safest
place to keep valuable commodities

5. GOLDSMITH
 It began from Goldsmith who had to take special
precautions against theft of gold & jewelry.
 The Goldsmith started charging something for
taking care of the money and valuables.
 The receipt became like cheques as a medium of
exchange and a means of payment.

6. MONEYLENDERS
 Goldsmith started advancing the coins on loan by
charging interest.
 He became a banker who started performing the
two functions of modern banking, that of
accepting deposits and advancing loans.

7. THE FIRST BANK
 The Romans , great builders and administrators of that
time took banking out of the temples.
 The first bank called the BANK OF VENICE was
established in Venice, Italy to finance the monarch in his
wars and in the same year the BANCO DI RIALTO
was established.
 People could deposit even their gold & silver items in
this bank for which the bank issue receipt.

8. MEANING
 Bank is a lawful organisation, which accepts deposits that can be withdrawn on
demand.
 It also lends money to individuals and business houses that need it.
 Banks also render many other useful services–like collection of bills, payment
offoreign bills, safe-keeping of jewellery and other valuable items, certifying the
credit-worthiness of business, and so on

9. MEANING
Banks accept deposits from the general public as well as from the business
community.
Anyone who saves money for future can deposit his savings in a bank.
Businessmen have income from sales out of which they have to make payment for
expenses.
They can keep their earnings from sales safely deposited in banks to meet their
expenses from time to time.
Banks give two assurances to the depositors–a)Safety of deposit, and b)Withdrawal of
deposit, whenever needed

10. ESTABLISHMENT OF BANKING
SYSTEM
The first bank in USA was set up in
Philadelphia in the year 1782.
In England the first bank was started in the
year 1825.
The first bank in India was established in
1786. From 1786 till today it has gone
through three distinct phases.

11. The Indian banking system consists of commercial banks, which may be public
scheduled or non-scheduled, private, regional, rural and cooperative banks. The
banking system in India defines banking through the Banking Companies Act of 1949.

12. HISTORY OF BANKING SYSTEM

13. HISTORY OF BANKING SYSTEM

14. PHASE 1
The General Bank of India was established in 1786. Then came the Bank of
Hindustan and Bengal Bank.
The East India Company established Bank of Bengal (1809).
Bank of Bombay (1840)
Bank of Madras (1843) and these banks were called as Presidency Bank.
These three banks were amalgamated in 1920 and named as the imperial Bank of
India, which was started as the Private shareholder bank with mostly European
Shareholder.

15. In 1865 Allahabad Bank was established and for the first time exclusively by
Indians.
Punjab National Banks was setup in 1894 with head quarter in Lahore.
Between 1906 to 1913 many Banks were established namely Canara Bank, Central
Bank, Bank of India, Bank of Baroda, Indian Bank, Bank of Mysore were
established.
Approximately 1100 banks were established.
To streamline the banks and to gain control over the banks Govt. of India came up
with the Banking Companies Act in 1948 , which was later changed to Banking
Regulation Act 1949.
PHASE 1

16. PHASE 2
Govt. took Major steps to bring reforms in Indian Banking Sector after independence.
In 1955, the nationalized The Imperial Bank of India with extensive banking facilities
on a large scale especially in rural and Semi-urban areas.
It form SBI to act as the principal agent of RBI.
In 1969 late Prime Minister Mrs. Indra Gandhi nationalized 14 commercial Banks.

17. In 1980 seven more banks were nationalized which brought around 80% banks under the
control of Govt.
Govt took the following steps:
1949 Enactment of Banking Regulation Act
1955 Nationalization of SBI
1959 Nationalization of SBI Subsidiaries
1961 Insurance cover extended to deposits
1969 Nationalization of 14 commercial banks
1971 Creation of credit guarantee corporation
1975 Creation of Regional Rural Banks (RRB)
1980 Nationalization of banks with deposits over 200 crores
PHASE 2

18. PHASE 3
This phase brought many facilities in the banking sector. In 1991 under the
chairmanship of Mr. M . Narasimham a committee was set up which work for the
liberalization of banks in India.
During this country is pooled with Foreign banks & ATMs , Phone banking and Net
banking was introduced.

19. BEGINNING OF MODERN
BANKING IN INDIA
 In 1786, English Agency House had established The General Bank of India.
 This was the beginning of the modern banking India.

20. EVOLUTION OF BANKING

21. THE PRE- INDEPENDENCE
 On the eve of independence in 1947 there were 648 commercial banks
comprising of 97 scheduled and 551 non schedule banks.
 The number of banks stood at 2987, total deposit at Rs 100800 million and
advances Rs 4750 million.

22. LIST OF BANKS IN INDIA BEFORE
INDEPENDENCE
Bank Year Established
Allahabad Bank 1865
Punjab National Bank 1894
Bank of India 1906
Central Bank of India 1911
Canara Bank 1906
Bank of Baroda 1908

23. THE POST-INDEPENDENCE
PHASE
 After independence, the evolution of the banking system in India continued
pretty much the same as before.
 In 1969, the Government of India decided to nationalize the banks under the
Banking Regulation Act, 1949.
 A total of 14 banks were nationalized, including the Reserve Bank of India
(RBI).

24. In 1975, the Government of India recognised that several groups were financially
excluded. Between 1982 and 1990, it created banking institutions with specialised
functions in line with the evolution of financial services in India.
 NABARD (1982) – to support agricultural activities
 EXIM (1982) – to promote export and import
 National Housing Board – to finance housing projects
 SIDBI – to fund small-scale industries
THE POST-INDEPENDENCE
PHASE

25. The LPG Era (1991 Till Date)
From 1991 onwards, there was a sea change in the Indian economy. The
government invited private investors to invest in India. Ten private banks were
approved by the RBI. A few prominent names which exist even today from this
liberalization are HDFC, Axis Bank, ICICI, DCB and IndusInd Bank.
In the early to mid-2000s, two other banks, Kotak Mahindra Bank (2001) and Yes
Bank (2004), received their licenses. IDFC and Bandhan banks were also given
licenses in 2013-14.

26. STRUCTURE OF BANKING

27. RESERVE BANK OF INDIA
RBI came into existence in 1935 as the central banking authority of India with a
share capital of Rs. 5 crores on the basis of recommendation of Hilton Young
commission. RBI was nationalized in 1949.

28. BANKING DEVELOPMENT
PRE-NATIONALIZATION
 Credit was excessively skewed in favour of large borrowers.
 Agricultural sector got only 2% of total bank credit.
 Features with the goals of achieving the equitable allocation of credit and relative
priorities set out in the five years plan.

29. NATIONALIZATION OF
BANKS
 Nationalization of banks is an act of taking a bank owned by private sector
into the public ownership of a national government by purchasing a majority
stake (i.e. more than 50%) by the government.
 In July 1969 Govt of India nationalized 14 major Scheduled commercial banks,
each having the minimum deposit of Rs 500 million.

30. REASONS WHY BANKS WERE
NATIONALISED IN INDIA
 To get a clearer picture of the impact of nationalisation on the banking industry and
the general population, let's understand why the government decided to nationalise
banks:
 To Energise Priority Sectors: Banks were collapsing at a fast rate – 361 banks
failed between 1947 and 1955, which converts to about 40 banks a year! Customers
lost their deposit with no chance of recovering them.
 A Neglected Agricultural Sector: Banks favoured large industries and businesses
and neglected the rural sector. Nationalisation came with a pledge to support the
agricultural sector.

31.  Expansion of Branches: Nationalization facilitated the opening of new branches to
ensure maximum coverage of banks throughout the country.
 Mobilization of Savings: Nationalizing the banks would allow people more access
to banks and encourage them to save, injecting additional revenue into a cash-
strapped economy.
 Economic and Political Factors: The two wars in 1962 and 1965 had put a
tremendous burden on the economy. The nationalization of Indian banks would
give the economy a boost through increased deposits.
REASONS WHY BANKS WERE
NATIONALISED IN INDIA

32. BENEFITS OF
NATIONALIZATION
 Increased Savings: There was a sharp increase in savings with the opening of new branches.
As national income rose in the 1970s, gross domestic savings almost doubled.
 Improved Efficiency: The efficiency of banks improved with additional accountability. It also
increased public confidence.
 Empowering SSIs: Small scale industries (SSIs) received a boost resulting in a proportionate
improvement in the economy.
 Financial Inclusion: The overall statistics of the banking sector and the Indian economy
showed a marked improvement. It reflected on parameters like the share of bank deposits to
GDP, gross savings rate, the share of advances to DGP, and gross investment rate from 1969 to
1991.

33. THE POSITIVE EFFECTS OF
NATIONALISATION
 The nationalisation of Indian banks was one of the most significant events in
the evolution of banks in India.
 Today, India has 19 nationalised banks.

34. RATIONAL FOR
NATIONALIZATION
 Removal of control of few large Industry & Business
 Provision for adequate credit for Agriculture, small Industries , exports etc.
 Giving Professional bent to management.
 Encouraging a new class of entrepreneurs.
 Change over from class banking to mass banking.

35.  5. Better Outreach: Banks were now no longer only restricted to metropolitan areas.
Branches were opened in the remotest corners of the country.
 6. A Surge in Public Deposits: The increased reach of banks helped small industries,
agriculture, and the export sector grow. This growth was accompanied by a proportionate
increase in public deposits.
 7. Elevating the Green Revolution: The Green Revolution, one of the biggest priority
items on the government’s agenda, received a boost thanks to the support that the newly-
nationalised banks provided to the agricultural sector.
RATIONAL FOR
NATIONALIZATION

36. IMPACT OF
NATIONALIZATION
 Unprecedented growth in the branch network of the commercial banks.
 Rapid growth in deposit mobilization and expansion of credit.
 However commercial banks faces decline in profitability
 Directed lending and less flexibility increase cost of operations

37. SCHEDULED BANK
 They are listed in the second schedule of the RBI Act.
 These have a paid up capital of Rs. 5 lakhs or more and comply with all the
requirements of the RBI.
 They maintain a cash reserve ratio with RBI.
 They are authorized to borrow funds from the Reserve Bank of India.
 They are comparatively more financially stable

38. NON-SCHEDULED BANK
 They are not listed in the second schedule of the RBI Act.
 There is no such condition that needs to be fulfilled for it to be considered a non-
scheduled bank.
 They maintain the CRR amount with themselves.
 They are not allowed to.
 These banks are riskier.

39. CONCLUSION
The reforms to the old banking system with
the advent of technology has bought in a
dramatic change in the functioning and has
increased customer relationship.

40. THANK YOU