The Banking system of India consists of the central bank (Reserve Bank of India), commercial banks, co-operative banks and development banks (development finance institutions). These institutions, which provide a meeting ground for the savers and the investors, form the core of India’s financial sector. Through mobilization of resources and their better allocation, banks play an important role in the development process of underdeveloped countries. Banking development in India has been, by and large, a state induced activity. The Reserve Bank of India was nationalized in 1949 followed by the nationalization of Imperial Bank of India commercial banks were nationalized and the exercise was repeated when 6 more commercial banks were nationalized in 1980. Thus, prior to economic reforms initiated in early 1990s, banking business in India was a near-monopoly of the Government of India. The underlying philosophy of this approach was to encourage growth, via availability of adequate credit of reasonable/concessional rates of interest, in areas where commercial considerations did not allow for disbursal of credit. Nationalization of commercial banks was a mixed blessing. After nationalization there was a shift of emphasis from industry to agriculture. The country witnessed rapid expansion in bank branches, even in rural areas. However, bank nationalization created its own problems like excessive bureaucratization, red-tapism and disruptive tactics of trade unions of bank employees. It was in this backdrop that wide-ranging banking sector reforms were introduced as an integral part of the economic reforms programme started in early 1990s and which is still under way. The present book explains and examines the changes which have swept the Indian banking sector over the last 60 years since Independence. The approach to the subject is mainly descriptive, interspersed by critical comments at places.
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