Growth of financial system/institutions can be discussed in two parts i.e.

I. Post independence

1.Nationalization (Public ownership of financial institutions)
– RBI was nationalized in 1948
– SBI was nationalized in 1956
– 14 commercial banks were nationalized in 1969 and 6 more banks in 1980
– LIC was nationalized in 1956
– GIC was nationalized in 1972

2. Establishment of development banks-
– NABARD in 1982 for agriculture and rural development
– National Housing Bank (NHB) in 1986 for housing development.
– Export Import Bank (EXIM) in 1982 for promoting international trade.
– Many national level organizations for industries such as IFCI, IDBI, IRBI,
-ICICI & state level institutions like SFC, SIDC etc.

3. Credit rating agencies for the benefit of investors.

4. Legal reforms for protection of investors.
– Indian companies Act 1956
– Securities Contract Regulation Act 1956
– MRTP Act 1972
– FERA Act 1973

5. Regulatory Bodies
– SEBI in 1988
– IRDA in 1999
– RBI in 1948 (established under RBI Act 1934, started working in 1935 and nationalized in 1948

6. Participation of financial institutions in corporate management started to
– Control on erring management
– Loan to corporate on the basis of nominees of financing institutions in the board of management.



II. Post Nineties

1.Privatization of financial institutions
– Organizations like IFCI, IDBI started take private equity
– Many private sector banks emerged under guidelines issued by RBI
– Many private sector insurance companies emerged-some of them in collaboration with foreign insurance companies.
– Many private mutual fund companies came it to picture

2. Protection of Investors-
– SEBI was made statutory body in 1992 to project interest of investors
– IRDA in 1999 came up to protect the interest of policy holder. More private insurance companies came in both life and not life insurance as per guidelines of IRDA

3. Liberalization
– In banking sector as more private sector banks came up.
– In insurance sector more insurance companies both in life and non life came up
– Economic liberalization policy started
– Many tax reforms came up
– Disinvestment in public sector undertakings
– Legal reforms by way of changes/amendments in Indian companies Act
– Globalisation


o Bank of Hindustan               Establishment– 1770                             Liquidation– 1829-32
(First Bank of India) by- Alexander & Co.

o After 16 After years
General Bank of India , Establishment- 1786 but failed in 1791

o Union Bank of India (1869)
(First Private Joint Stock Association)

o Presidency Banks
Three banks called Presidency Banks
I. Bank of Bengal Establishment-1806
(Bank of Calcutta established in 1806 but after that renamed as Bank of Bengal in 1809)
II. Bank of Bombay Establishment- 1840
III. Bank of Madras Establishment- 1843


27 January 1921 Presidency Banks merged to form

Imperial Bank of India (1921)

After Independence on 01 July 1955 Imperial Bank of India became State Bank of India (1955)

Nationalised- 02 June 1956

 SBI Act, 1955

In 1960 SBI was given control to 8 associates Banks under the SBI (Subsidiaries banks) Act, 1959.


Allahabad Bank                                     Establishment-1865
(Oldest Joint Stock Bank in India Still functioning today)
It was not first though. That honour belongs to Bank of Upper India (Establishment-1881) but failed in 1913. Some of its Assets & Liabilities transferred to Alliance Bank of Simla.

o HSBC established itself in Bengal 1869.

o Oudh Commercial Bank                          Establishment-1881 in Faizabad but failed in 1958
(The first entirely Indian Joint Stock Bank)

o Punjab National Bank (1894) in Lahore
(Which was survived to the present and is now largest Public Sector Bank in India)
In 1993 Govt. merged New Bank of India with PNB (Now Nationalised Banks 20 to 19)

o Between 1906 to 1911 Established no. of Banks have survived present such as-
Bank of India, Corporation Bank, Bank of Baroda, Canara Bank & Central Bank of India.

o Reserve Bank of India (1935)                                             Nationalised– 01 January, 1949
Under the term of RBI (Transfer to public ownership) Act, 1948
For many years the Presidency Banks had acted as quasi-central Bank as their successor, until the RBI



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