History of Banking in India – Static GK & Banking Awareness Notes for SSC, IBPS, UPSC, RRB and PSU Exams with Memory Tricks

Introduction

The history of banking in India traces the journey of the country's financial system from the indigenous money-lenders of ancient India to the modern, technology-driven banking sector of today. The story begins with the Bank of Hindustan, founded in 1770 in Calcutta — the country's first joint-stock bank — and runs through the three Presidency Banks, the Imperial Bank of India (1921), the State Bank of India (1955), two waves of nationalisation in 1969 and 1980, the Narasimham Committee reforms of the 1990s, and the major public-sector bank mergers of 2017-2020 that reduced 27 public sector banks to just 12.

Questions on the history of banking in India are a staple of IBPS PO, IBPS Clerk, SBI PO, SBI Clerk, RBI Grade B, RRB NTPC, SSC CGL, UPSC Prelims, NABARD Grade A, Insurance (LIC AAO, NIACL AO), and State PCS exams. They typically appear in the Banking Awareness, General Awareness, and Economy sections. To explore a structured list of every banking topic that appears in exams, you can refer to the dedicated Banking Awareness notes section on Jobsme.in.

This article presents the full timeline, structure, components, and key reforms of Indian banking in one place — arranged in tables, mnemonics, and one-liners so that aspirants can revise the entire topic in a single sitting before the exam.

Core Concepts: The Three Phases of Banking in India

The history of banking in India is conventionally divided into three clear phases. Understanding the phase-wise framework helps students place every bank, committee, and reform on the correct timeline, which is exactly how exam questions are framed.

• Phase 1 - Pre-Independence Era (1770 to 1947): Beginning with the Bank of Hindustan in 1770, this phase saw the establishment of the three Presidency Banks (Bank of Bengal, Bank of Bombay, Bank of Madras), their merger into the Imperial Bank of India in 1921, and the founding of several major Indian banks such as Allahabad Bank, Punjab National Bank, Bank of India, Bank of Baroda, Canara Bank, and Central Bank of India. The Reserve Bank of India was also set up in 1935 during this phase.
• Phase 2 - Post-Independence and Nationalisation Era (1947 to 1991): The Imperial Bank of India was nationalised in 1955 to form the State Bank of India. Fourteen major banks were nationalised on 19 July 1969 and six more on 15 April 1980. RRBs, NABARD, and EXIM Bank were established during this phase.
• Phase 3 - Liberalisation Era (1991 to present): Based on the recommendations of the Narasimham Committee, the RBI granted licences to 10 new private sector banks (ICICI, HDFC, Axis, IndusInd, IDBI, etc.). This phase also saw the SBI associate banks merger in 2017 and the mega public sector bank mergers of 2019-2020 that reduced 27 PSBs to 12.

Phase 1: Pre-Independence Era (1770 to 1947)

The pre-independence era marks the foundation of the modern banking system in India. Over 600 banks were established during this period, but very few survived due to fraud, lack of technology, poor management, and limited facilities. The few that survived became the pillars of modern Indian banking.

Key Banks Established Before Independence

Reasons Why Most Pre-Independence Banks Failed

• Account holders were vulnerable to fraud and forgery.
• Absence of modern machines and banking technology.
• Heavy dependence on manual processes, leading to human errors and delays.
• Very limited customer facilities and product range.
• Lack of proper management and professional skills.

Phase 2: Post-Independence and Nationalisation Era (1947 to 1991)

After independence, the Indian government realised that most major banks were privately owned and rural Indians still depended on moneylenders. To direct credit toward agriculture, small industries, and weaker sections, the government undertook two major waves of nationalisation along with a string of institutional reforms. This phase also saw the conversion of the RBI itself into a fully government-owned institution.

Major Events of the Nationalisation Era

List of Banks Nationalised in 1969 and 1980

Why Bank Nationalisation Was Carried Out

• To channel banking funds into priority sectors such as agriculture, small-scale industries, and exports.
• To strengthen the rural and agricultural economy and reduce dependence on moneylenders.
• To increase the geographical spread of banking, especially in unbanked rural areas.
• To use bank profits for public welfare and government development schemes.
• To reduce wasteful competition among private banks and improve operational efficiency.
• To create large-scale employment in the banking sector.

Phase 3: Liberalisation Era (1991 to Present)

To restore stability, profitability, and competitiveness to the public sector banks, the Government of India set up a committee under M. Narasimham in 1991. The Narasimham Committee I (1991) and Narasimham Committee II (1998) recommended sweeping financial-sector reforms — capital adequacy norms, prudential accounting standards, opening up the banking sector to private and foreign players, and reduction of statutory liquidity ratios.

Ten Private Sector Banks Licensed After 1991

Acting on the Narasimham Committee report, the RBI granted banking licences to ten new private sector banks. This marked the beginning of new-generation private banking in India.

• ICICI Bank - converted from financial institution to commercial bank; today the second-largest private bank.
• HDFC Bank - currently the largest private sector bank in India by market capitalisation.
• Axis Bank - originally launched as UTI Bank in 1993, renamed in 2007.
• IndusInd Bank - established in 1994; headquartered in Pune.
• IDBI Bank - originally a development financial institution.
• Global Trust Bank - later merged with Oriental Bank of Commerce in 2004.
• Bank of Punjab - later merged with Centurion Bank to form Centurion Bank of Punjab.
• Centurion Bank - eventually acquired by HDFC Bank in 2008.
• Times Bank - acquired by HDFC Bank in 2000.
• Development Credit Bank (DCB Bank) - still operating, headquartered in Mumbai.

Major Bank Mergers of 2017 to 2020

Structure and Components of the Indian Banking System

The Indian banking system is led by the Reserve Bank of India and is organised into scheduled and non-scheduled banks. Scheduled banks are further divided into commercial banks (public, private, foreign, regional rural) and cooperative banks. Understanding this structure is essential for Banking Awareness questions in IBPS, SBI, and RRB exams. For a more detailed breakdown, students can refer to the Banking Awareness notes on Jobsme.in.

Components of the Indian Banking System

List of 12 Public Sector Banks (After 2020 Mergers)

Top 10 Indian Banks by Market Capitalisation

• HDFC Bank - largest private sector bank.
• State Bank of India - largest public sector bank.
• ICICI Bank - second-largest private sector bank.
• Axis Bank - formerly UTI Bank.
• Kotak Mahindra Bank - converted from NBFC to bank in 2003.
• IndusInd Bank
• Yes Bank
• Punjab National Bank
• Bank of Baroda
• Bank of India

Memory Tricks and Mnemonics

Memorising bank names, dates, and merger details can be tough. The following mnemonics and tricks make it far easier for exam aspirants.

Trick 1 - "1770 Bank of Hindustan, 1832 it was gone"

A simple rhyme to lock in the birth year of Indian banking (1770) and the year the Bank of Hindustan stopped operating (1832). "Saath se shuru, doh se khatam" — started in 70, ended in 32.

Trick 2 - "BBM = Bank of Bengal, Bombay, Madras"

The three Presidency Banks share the same initials as the chat app BBM. Remember: BBM merged in 1921 to form the Imperial Bank, which became SBI in 1955.

Trick 3 - "Indira's 14 in '69, Charan Singh's 6 in '80"

The first round of nationalisation (14 banks) happened on 19 July 1969 under Prime Minister Indira Gandhi. The second round (6 banks) happened on 15 April 1980 — again during the Indira Gandhi era after her return to power. Indira ne banti baant li — 14 pehle, 6 baad mein.

Trick 4 - "ABCDU and IPS-CCU + Bank of M" (14 banks of 1969)

Use this segment-based memory aid:

• ABCDU → Allahabad, Bank of India, Bank of Baroda, Central Bank, Dena Bank, Union Bank, United Bank, UCO.
• IPS-CC → Indian Bank, Indian Overseas Bank, PNB, Syndicate, Canara, Canara group.
• Bank of M → Bank of Maharashtra.

Tip: Whenever a bank starts with the letter "A" except Allahabad — it was nationalised in 1980, not 1969 (Andhra Bank). Same for Corporation Bank, OBC, Punjab & Sind, Vijaya, and New Bank of India.

Trick 5 - "ACO-PVN" (6 banks of 1980)

Six banks were nationalised in 1980. Remember them as ACO-PVN:

• Andhra Bank
• Corporation Bank
• Oriental Bank of Commerce
• Punjab and Sind Bank
• Vijaya Bank
• New Bank of India

Trick 6 - "1991 Narasimham Knocked, Private Sector Walked In"

The Narasimham Committee of 1991 triggered the entry of 10 new private sector banks. Remember the top 4 as HIAA — HDFC, ICICI, Axis, And IndusInd. "Naya zamana, Naya bank" — the moment liberalisation began, modern private banking was born.

Trick 7 - "PUBLIC + CANINE" — The 2020 Merger Pairs

Remember the 4 anchor banks of the 2020 mega-merger by the first letters: P-C-U-I.

• PNB ate OBC + United Bank.
• Canara ate Syndicate.
• Union ate Andhra + Corporation.
• Indian Bank ate Allahabad.

27 PSBs became 12 — the biggest consolidation in India's banking history.

Trick 8 - "RBI = 1935 born, 1949 reborn"

RBI was established in 1935 as a private entity (under RBI Act 1934, on Hilton-Young Commission recommendations). It was nationalised on 1 January 1949. "Pehle private, phir public".

Additional Notes

Frequently Confused Facts

• First bank of India vs First Indian bank: Bank of Hindustan (1770) was the first bank in India, but it was set up by British agents. The first bank set up purely with Indian capital and management was Punjab National Bank (1894).
• Oldest joint-stock bank still functioning: Allahabad Bank (1865) held this distinction until it was merged with Indian Bank in 2020. The oldest one still functioning today is the State Bank of India (traceable to Bank of Calcutta, 1806).
• RBI Act vs Banking Regulation Act: RBI Act was passed in 1934 (RBI started in 1935); Banking Regulation Act was passed in 1949.
• Imperial Bank vs State Bank of India: Imperial Bank was formed in 1921 by merging the three Presidency Banks. It was nationalised in 1955 and renamed State Bank of India.
• First Nationalisation cut-off vs Second: 1969 cut-off was deposits of Rs. 50 crore or more (14 banks). 1980 cut-off was Rs. 200 crore or more (6 banks).
• Number of associate banks merged with SBI in 2017: 5 associate banks + Bharatiya Mahila Bank. Saurashtra had merged earlier in 2008 and Indore in 2010.
• Bank of India vs Central Bank of India: Bank of India (1906) was the first commercial bank owned and managed by Indians. Central Bank of India (1911) is described as the first commercial bank entirely Indian-owned, managed and capitalised.
• NABARD vs RRB: RRBs were created in 1975 (RRB Act 1976). NABARD was set up in 1982 on the recommendations of the Sivaraman Committee.

Repeating PYQ Patterns

• IBPS PO / Clerk: Year of nationalisation of specific banks (1969 vs 1980), headquarters of public sector banks, and merger pairs of 2017-2020 — asked almost every year.
• SBI PO / Clerk: Heavy focus on SBI's evolution — from Bank of Calcutta to Imperial Bank to SBI — and on which associate banks merged when.
• RBI Grade B: Founders and first governors of RBI, recommendations of the Narasimham Committee, and structure of cooperative banks.
• SSC CGL / RRB NTPC: First bank of India (Bank of Hindustan), founder of PNB (Lala Lajpat Rai), and year of formation of Imperial Bank.
• UPSC Prelims: Conceptual questions on the role of RBI, priority sector lending, and reforms of the 1990s.
• State PCS / Insurance: Repeated questions on headquarters of major PSBs, RRBs, and full forms of banking acronyms (DICGC, NABARD, EXIM, NHB).

Quick Insight

The Indian banking sector is at the heart of every recent economic reform — from the Jan Dhan Yojana and Direct Benefit Transfers to UPI, Digital Rupee (e-Rupee), Account Aggregator framework, and the proposed Bad Bank (NARCL). Knowing the historical journey from 1770 to 2020 helps aspirants understand why these modern reforms were necessary and how they connect to past nationalisation and liberalisation phases. For the latest exam-relevant updates on banking topics, you can follow the Daily Current Affairs page on Jobsme.in.

One-Liners for Quick Revision

• Bank of Hindustan → First bank of India, established 1770, headquartered in Calcutta, closed by 1832.
• Three Presidency Banks → Bank of Bengal (1806), Bank of Bombay (1840), Bank of Madras (1843), all set up by the East India Company.
• Imperial Bank of India → Formed in 1921 by merging the three Presidency Banks; nationalised in 1955.
• State Bank of India (SBI) → Created on 1 July 1955 by nationalising the Imperial Bank; largest public sector bank; headquartered in Mumbai.
• Allahabad Bank → Established 1865; oldest joint-stock bank of India; merged with Indian Bank in 2020.
• Punjab National Bank → Established 1894; first bank purely with Indian capital and management; founder Lala Lajpat Rai; HQ New Delhi; merged with OBC and United Bank in 2020.
• Bank of India → Established 1906; first commercial bank owned and managed by Indians; HQ Mumbai.
• Canara Bank → Established 1906 by Ammembal Subba Rao Pai; HQ Bengaluru; absorbed Syndicate Bank in 2020.
• Bank of Baroda → Established 1908 by Maharaja Sayajirao Gaekwad III; HQ Vadodara; merged with Vijaya and Dena Bank in 2019.
• Central Bank of India → Established 1911 by Sir Sorabji Pochkhanawala; first fully Indian-owned commercial bank; HQ Mumbai.
• Reserve Bank of India (RBI) → Set up under RBI Act 1934 on Hilton-Young Commission recommendation; began operations 1 April 1935; nationalised 1 January 1949; first Governor Sir Osborne Smith; first Indian Governor C. D. Deshmukh.
• Banking Regulation Act → Passed in 1949; gives RBI powers to license, inspect, and supervise banks in India.
• First Nationalisation → 19 July 1969; 14 banks with deposits of Rs. 50 crore or more nationalised under PM Indira Gandhi.
• Second Nationalisation → 15 April 1980; 6 more banks with deposits of Rs. 200 crore or more nationalised.
• Regional Rural Banks (RRBs) → Established under RRB Act 1976; first RRB Prathama Bank (1975) in Moradabad, UP; sponsored by Syndicate Bank.
• NABARD → Established 12 July 1982 on Sivaraman Committee recommendation; HQ Mumbai; apex body for rural credit.
• EXIM Bank → Established 1982 to promote India's foreign trade.
• DICGC → Established 1978; subsidiary of RBI; insures bank deposits up to Rs. 5 lakh per depositor (revised 2020).
• SBI Associate Banks Act → Passed in 1959 to convert state-associated banks into SBI subsidiaries.
• New Bank of India → First PSB merger after nationalisation; merged with PNB in 1993.
• Narasimham Committee I → 1991; recommended capital adequacy, prudential norms, and entry of new private banks.
• Narasimham Committee II → 1998; recommended bank mergers, reduction of CRR/SLR, and stronger NPA recovery.
• 10 Private Sector Banks licensed → ICICI, HDFC, Axis (UTI Bank), IndusInd, IDBI, Global Trust Bank, Bank of Punjab, Centurion Bank, Times Bank, Development Credit Bank.
• State Bank of Saurashtra → First SBI associate bank to be merged with SBI; merged in 2008.
• State Bank of Indore → Second SBI associate bank merged; merged in 2010.
• SBI 2017 Merger → 1 April 2017; SBI absorbed 5 associate banks (Bikaner & Jaipur, Hyderabad, Mysore, Patiala, Travancore) plus Bharatiya Mahila Bank.
• 2019 Merger → Vijaya Bank and Dena Bank merged into Bank of Baroda, making BoB the third-largest bank.
• 2020 Mega Merger → 10 PSBs merged into 4 anchor banks (PNB, Canara, Union, Indian Bank); total PSBs reduced from 27 to 12.
• HDFC Bank → Largest private sector bank by market capitalisation; HQ Mumbai; founded 1994.
• ICICI Bank → Founded 1994; HQ Mumbai; converted from financial institution to commercial bank.
• Axis Bank → Founded 1993 as UTI Bank; renamed Axis Bank in 2007; HQ Mumbai.
• Kotak Mahindra Bank → Founded 2003 (converted from NBFC); HQ Mumbai.
• Yes Bank → Founded 2004; HQ Mumbai; bailed out by SBI-led consortium in 2020.
• IDBI Bank → Originally a development financial institution set up in 1964; converted to bank later.
• Bandhan Bank → Founded 2015; HQ Kolkata; started as a microfinance institution.
• IDFC First Bank → Founded 2015; HQ Mumbai.
• Federal Bank → Founded 1931; HQ Aluva, Kochi (Kerala).
• South Indian Bank → Founded 1929; HQ Thrissur, Kerala.
• City Union Bank → Founded 1904; HQ Kumbakonam, Tamil Nadu; one of the oldest private banks.
• Karur Vysya Bank → Founded 1916; HQ Karur, Tamil Nadu.
• Tamilnad Mercantile Bank → Founded 1921; HQ Tuticorin, Tamil Nadu.
• J&K Bank → Founded 1938; HQ Srinagar; only state-promoted bank with private status.
• Karnataka Bank → Founded 1924; HQ Mangaluru.
• Dhanlaxmi Bank → Founded 1927; HQ Thrissur, Kerala.
• CSB Bank → Founded 1920; HQ Thrissur, Kerala; formerly Catholic Syrian Bank.
• Nainital Bank → Founded 1922; HQ Nainital, Uttarakhand; subsidiary of Bank of Baroda.
• RBL Bank → Founded 1943; HQ Mumbai; formerly Ratnakar Bank.
• Foreign Banks in India → 45 in number; hold 7% market share; contribute 11% to sector profits; allowed by RBI as branch or wholly-owned subsidiary.
• Regional Rural Banks → Government-owned scheduled commercial banks; ownership shared 50:15:35 between Centre, State, and sponsor bank.
• Cooperative Banks → Owned by their members; regulated under Banking Regulation Act 1949 and Banking Laws Act 1955.
• Urban Cooperative Banks (UCBs) → 1,531 in number; could lend only for non-agricultural purposes until 1996.
• Scheduled Banks → Listed under Schedule II of RBI Act, 1934; must have paid-up capital and reserves of at least Rs. 5 lakh.
• Top 10 Indian Banks by Market Capitalisation → HDFC, SBI, ICICI, Axis, Kotak Mahindra, IndusInd, Yes Bank, PNB, Bank of Baroda, Bank of India.
• Current count of banks in India → 12 Public Sector Banks, 21 Private Sector Banks, 45 Foreign Banks.

To strengthen these facts further, attempt the Banking Awareness Quiz and the Static GK Quiz on Jobsme.in. Aspirants should also stay updated with the Latest Government Job Notifications to make the most of their Banking Awareness preparation.