Description of the Indian Bank System

The Indian banking system is very well developed, and most of these banks were founded by visionaries and entrepreneurs with an aim to assist the traders, budding industrialists, agriculturists and laymen financial assistance. Banking in India dates back to the late 1800s. The first banks in India were the Bank of Hindustan and The General Bank of India. Of course these are now defunct, and at present the State Bank of India (SBI) is considered to be the oldest bank existing in India which was established in 1806.

The Reserve Bank of India (RBI) is considered as the banker of all the banks in India. The RBI looks after the role of central banking. Earlier this responsibility was handled by the Imperial Bank of India but things took a turn in 1935, after which the RBI became the sole controller of all the other banks. It was nationalized in the year 1947 and broader powers were given to it.

The main functions of the RBI are to control issues regarding issuing currency notes, to operate and control the currency and credit system in India and to maintain reserves with a motive of securing monetary stability. RBI is also considered as the lender of the last resort and it has the power of controlling or influencing the volume of credit that is created by the banks in India. It not only holds the cash reserves of the entire lot of scheduled banks but also has the power to exercise qualitative and quantitative controls over all the banks in India. The central office of RBI is located in Shaheed Bhagat Singh Road in Mumbai.

In India, the commercial banking structure comprises of scheduled commercial banks and unscheduled banks. The banks that were included in the Second Schedule Act, 1934 of the RBI are known as scheduled banks. There are two other types of banks in India as well and these are public sector banks and private sector banks. The banks whose stakes are held by the Indian Government are said to be public sector banks and the banks whose stakes are not held by the Government are considered private sector banks.

Since the inception of the banking system in India, private banking was practiced. IndusInd was the first private bank to be set up in India and it is also one of the fastest growing banks among the other private sector banks. The IDBI (Industrial Development Banks of India) is another private bank in India that holds a rank of being the world’s tenth largest development bank. Other popular private banks in India are Bank of Punjab, HDFC (Housing Development Finance Corporation), Federal Bank, City Union Bank, ICICI, ING Vysya Bank and Axis Bank.

The United Bank of India is one of the most famous banks among the Indian public sector banks. Of course the State Bank of India too is not far below in the list, it has its subsidiaries in Hyderabad, Bikaner & Jaipur, Mysore, Indore, etc just to name a few. Other examples of public sector banks in India are Allahabad Bank, Bank of Baroda, Bank of India, Canara Bank, Punjab & Sind Bank, Syndicate Bank, IDBI bank, Indian Overseas Bank, etc.