A Brief History of Banking in India

Ancient Indigenous Banking System

• In ancient times, businessmen like Shroffs, Seths, Sahukars, Mahajans, and Chettis did banking.
• They were small money lenders and big shroffs with large businesses.
• Some of these businesses were bigger than modern banks.

Beginning of Modern Banking

• Western-style commercial banking began in the 18th century.
• The first bank, Bank of Hindusthan, was set up in 1770 in Calcutta.
• It was run by Europeans.

Important Banks in the 1700s and 1800s

• In 1786, the General Bank of India was established.
• Calcutta became the center for banking due to its trade importance with the British Empire.
• Three major banks were set up: Bank of Calcutta, Bank of Bombay, and Bank of Madras.
• These banks acted as central banks for many years.
• Bank of Calcutta started in 1806 and was renamed Bank of Bengal.
• In 1921, these three banks merged to form the Imperial Bank of India.
• After independence in 1955, the Imperial Bank became the State Bank of India, the oldest bank in India.

Other Important Banks

• In 1839, Indian merchants tried to start Union Bank, but it failed after 10 years.
• Allahabad Bank was set up in 1865 and is still running today.
• The Bank of Upper India was the oldest joint-stock bank, founded in 1863, but it closed in 1913.
• Oudh Commercial Bank, set up in 1881, was the first Indian bank with limited liability. It failed in 1958.
• Punjab National Bank, established in 1895 in Lahore, was the first bank fully managed by Indians.