Agency Houses – started with the beginning of the occidental banking in India. The Calcutta Agency Houses, the trading firms, which undertook banking operations for the benefit of their constituents. Prominent among these were Messrs Alexander & Co., and Messrs Fergusson & Co. Both firms combined banking with other kind of business, and both were the predecessors of the early joint-stock banks in India. The Bank Hindustan, a mere appendage of the former, was the earliest bank started under European directions in India.
The Presidency Banks - The Indian Government did not awaken to the great need for banks in India till 1809, the year in which the Bank of Bengal obtained its charter with a capital of Rs. 50 Lakhs, one fifth of which was contributed by the Government, who shared in the privilege of voting and direction. The charter restricted the Bank’s rate of interest to a maximum of 12 per cent. The power of note issue, however, was not given to the Bank till 1823. In 1839, the bank was given the power to open branches and to deal in inland exchange. The two other Presidency banks viz., the Bank of Bombay and the Bank of Madras were established in 1840 and 1843 respectively. The former had a share capital of Rs. 52,25,000/- and the later Rs. 30 Lakhs, the Government subscribing Rs. 3 Lakhs in each case. As the notes issued by the Presidency Banks didn’t become popular, they were replaced by Government paper money in 1862.
The Swadeshi Movement: - Its impetus for starting new Banks – Thanks to the Swadeshi movement, which prompted Indians to start many new institutions, the number of joint- stock banks increased remarkably during the boom of 1906-13. 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 Ltd., were started ruing this period. The boom continued till it was overtaken by the crash of 1913-17, the most severe crisis that the Indian joint –stock banks have so far experienced.
The Presidency Banks referred to above, were amalgamated in to the Imperial Bank of India, which was brought in to existence on 27th January 1921, by the Imperial Bank of India Act of 1920. This Act however, gave the Bank no power to issue notes and thus left it without control over currency of the country. But it was allowed to hold Government balance and to manage the Public debt and clearing houses till the establishment of the Reserve Bank of India in 1935. The Reserve Bank of India took over all these functions from the Imperial Bank of India, but the latter was given the privilege of acting as agent of the former in places in which it had no branches. Although the Imperial Bank of India was created by a special act called the Imperial Bank of India act 1920, the liability of its share holders, like that of share holders of any other bank registered under the Indian Companies act, was limited. The only difference was that the word “ limited’ did not form a part of its name, as it does in the case of banks constituted under the latter Act. With the passing of the state Bank of India act 1955, the under taking of the Imperial Bank of India was taken over by the newly constituted State Bank of India. It has the largest number of branches all over India, and does considerable business in commercial banking like other banks. It was mainly for this reason that this bank was no converted in to a Central banking institution of the Country.
Pursuant to the provisions of the State Bank of India (Subsidiary Banks) act, 1959, the Bank of Bikaner, the Bank of Indore, the Ban of Jaipur, The Bank of Mysore, the Bank of Patiala, the Travancore Bank, the State Bank of Hyderabad and the State Bank of Saurashtra have been constituted as subsidiaries of the State Bank of India. This has extended the area of operation of the State Bank of India.
Establishment of the Reserve Bank of India. – Although suggestions have been made from time to time that India ought to have a Central Bank, they did not take definite shape until 1926, when the Royal Commission on Indian Currency and Finance recommended that a Central Bank should be started in India so as to perfect her credit and currency organization. The proposal assured importance and a fresh bill was accordingly introduced by Sir George Schuster in September, 1933. It was enacted in due course, and became law on the 6th March 1934 and the Reserve bank of India started functioning with effect from 1st April. 1935. The Reserve Bank of India made determined efforts to place the banking and monetary structure of the country on a sound basis, either through advice or persuasion or through a well devised system of inspection of bank.
PASSING OF BANKING ACT – The Banking Companies act, 1949, was passed to consolidate and amend the law relating to banking companies. The need for this was felt owing partly to the abuse of powers by persons controlling some banks and the absence of measurers for safeguarding the interest of depositors of banking companies in particular and partly to the economic interests of the country in general. With effect from 1.3.1966 the name of the act has been changed to the Banking Regulation Act 1949 (10 of 1949).
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