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July 26, 2014

Banking Awareness Study Material - Origin and Evolution of Banking


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The origin of the banking system lies in the business of money changes in ancient periods. The Babylonians had developed a banking system as early as 2000 B.C. The practice of lending was widely prevalent in ancient Greece and Rome. The banking activities were developed in Italy. Later the banking activities were spread from Italy to Britain. Some of the Italian money lenders were settled at London and offered their services in 13th century A.D. Goldsmiths began to accept deposits of gold coins at London in the early 17th Century. The bank of England was started in 1694. Because of growing incidence of bank failures, the British government passed the Bank Act in 1826, which allowed the establishment of banks with unlimited liability. This led to the starting of joint stock banks in England.

History of Banking in India

The Bank of Hindustan was the earliest bank started in British India in the year 1779. Later three presidency banks were established one each in Calcutta, Bombay and Madras presidencies in British India. They are,

  1. Bank of Bengal in Calcutta (1809)
  2. Bank of Bombay (1840) and 
  3. Bank of Madras (1843). 
These banks were used to transact the business of the three presidencies. These three Banks were amalgamated in to Imperial Bank of India in the year 1921. The Allahabad Bank and  Punjab National Bank were established during the period 1880-1895. Later, there was a mushroom growth of banks and several of them failed to survive due to mismanagement, speculation and fraud. The Swadeshi movement promoted Indians to start a number of joint stock banks, especially during the period 1906-1913. The Peoples Bank of India Ltd, the Bank of India ltd., the Central Bank of India Ltd., Indian Bank Ltd., and the Bank of Baroda were started during this period. The British Government in India had started a central bank called the Reserve Bank of India as a private bank on 1st April 1935. The banks in India were functioning without any effective legislative controls by a central bank. There were no comprehensive banking laws except the Bank Charter Act 1876 which regulated three presidency banks. However the Indian Companies Act 1913 has provided some safeguards against bank failures. Even the Reserve Bank of India Act 1934 did not contain much, except empowering the Reserve Bank to include or exclude a bank from the list of scheduled banks. The Indian Companies Act was amended in the year 1936 to incorporate major recommendations of the Central Banking Enquiry Committee. In 1942, there was further amendment and the banking companies act was passed in 1949 containing some provisions to regulate banking companies in the country.

That's all for now friends. In our next post we shall discuss about the commercial banking system after independence. Happy Reading :)

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  1. mam how to solve syllogism posssibility type questions. my xam is tomorrow

    1. Hope this link will help you

  2. in todays exam 70% from banking
    GA section - difficult
    1.signature in one rupee note
    3.union health minister of swedan
    5.camal is the state animal of which state
    6.the state without a regional rural bank
    7.RBI inject liquidity to economy in what method question about telangana
    9.the constituency of sushma swaraj
    10.nilgiris is located in which state day for old persons
    12.cauvery committee chairman
    13.plastic note introduced by which country
    14.a street named as a r rehman in which country
    15.highest urban population in which state
    16.fighter aircraft developed by DRDO

  3. ya most of question from banking how i get material for thar

  4. mam how can i download complete banking material????????????

  5. bank of hindustan established in the year 1770


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