Banking Awareness
✨ Login to trackBanking History & Reforms
✨ Login to trackIndian banking grew from trading houses in the 1700s to today's 12 public sector banks. The turning points are the 1969-80 nationalisation, the 1991 liberalisation with the Narasimham Committees, and the mergers of 2017-2020.
The early banks
The Bank of Hindostan (1770) was the first bank in India. It later failed.
Three presidency banks came next: Bank of Bengal (1806), Bank of Bombay (1840) and Bank of Madras (1843). They merged in 1921 to form the Imperial Bank of India.
Allahabad Bank (1865) is the oldest surviving joint-stock bank. Punjab National Bank (1894) was the first bank fully managed by Indians. The Central Bank of India (1911) was the first wholly owned and managed by Indians.
Note: The Swadeshi movement of the early 1900s bred many of these banks.
The nationalisation era
| Year | Event |
|---|---|
| 1949 | RBI nationalised; the Banking Regulation Act, 1949 gave RBI supervisory powers |
| 1955 | SBI created from the Imperial Bank |
| 1969 | 14 banks nationalised on 19 July |
| 1975 | Regional Rural Banks started |
| 1980 | 6 more banks nationalised on 15 April |
The government nationalised banks to push credit to farming, small industry and the poor. The Lead Bank Scheme (1969) assigned each district to one bank.
Rule: 1969 means 14 banks and ₹50 crore. 1980 means 6 banks and ₹200 crore.
Liberalisation of 1991 and Narasimham
A balance-of-payments crisis forced the reforms of 1991: the rupee was devalued, controls were loosened, and new private banks were licensed.
The Narasimham Committee I (1991) asked for lower reserve requirements, prudential norms for bad loans, and free entry for private banks. The Narasimham Committee II (1998) urged mergers to build a few strong banks and a lower government stake.
Tip: One in 1991 opens the door. Two in 1998 builds stronger banks.
Basel norms in brief
| Norm | Year | Main idea |
|---|---|---|
| Basel I | 1988 | Minimum capital for credit risk (8%) |
| Basel II | 2004 | Three pillars: capital, supervision, market discipline |
| Basel III | 2010 | More and better capital, plus liquidity buffers |
India implemented Basel III from 1 April 2013. The RBI keeps the minimum total capital ratio at 9%, above Basel's 8%.
Example: Basel III was born after the 2008 global crisis, which showed how fast bank funding can dry up.
Consolidation after 2017
In 2017, the five associate banks of SBI and Bharatiya Mahila Bank merged into SBI.
Announced in August 2019 and effective 1 April 2020, the mega-merger folded ten PSBs into four. Punjab National Bank took in OBC and United Bank of India. Canara Bank took in Syndicate Bank. Union Bank took in Andhra Bank and Corporation Bank. Indian Bank took in Allahabad Bank.
The count fell to 12 public sector banks.
Watch: RRBs have also been merged in several rounds. Check the current count before your exam.
Question types you will see
Each type: how to recognise it, the method step by step, and one question to try.
Firsts and oldest banks
The question asks for the first bank in India, the oldest surviving bank, or gives a bank-year match.
First bank: Bank of Hindostan, 1770.
Oldest surviving joint-stock bank: Allahabad Bank, 1865.
First fully Indian-managed: PNB 1894. First fully Indian-owned and managed: Central Bank of India 1911.
Four 'firsts' cover most options.
Which was the first bank established in India?
Show solutionHide solution
It was a European agency house's venture.
It opened in 1770 in Calcutta.
Bank of Hindostan
Nationalisation milestones
The question asks about the second nationalisation wave, the 1980 count, or the RBI and SBI years.
1949: RBI. 1955: SBI. 1969: 14 banks. 1980: 6 banks.
The 1969 cut-off was ₹50 crore; the 1980 cut-off was ₹200 crore.
RRBs joined in 1975.
The year chain is asked in both directions.
Six more banks were nationalised in India in which year?
Show solutionHide solution
The bigger round was 1969.
The smaller round came eleven years later.
1980
Narasimham Committee recommendations
The question asks which committee recommended lower SLR and CRR, or bank mergers, or matches a committee to a year.
Narasimham I (1991): prudential norms, fewer reserves, new private banks.
Narasimham II (1998): mergers, strong banks, lower government stake.
Both were chaired by M. Narasimham.
Match the recommendation to the report number.
Which committee recommended mergers of big banks and a lower government stake in banks?
Show solutionHide solution
It was the second report.
It came in 1998.
Narasimham Committee II (1998)
Basel norms matching
The question says 'Basel I was published in', 'the three pillars belong to', or asks when India adopted Basel III.
I: 1988, credit-risk capital. II: 2004, three pillars. III: 2010, capital plus liquidity.
India ran Basel III from 1 April 2013.
India's minimum total capital is 9%, above Basel's 8%.
Year, pillar count and the Indian level form the trio.
The three-pillar framework of minimum capital, supervisory review and market discipline belongs to which accord?
Show solutionHide solution
It expanded the credit-risk rules into three parts.
It is the 2004 accord.
Basel II
PSB merger pairs
The question asks which bank merged with Syndicate Bank, how many PSBs remain, or the effective date of mergers.
April 2020: PNB + OBC + United Bank; Canara + Syndicate; Union + Andhra + Corporation; Indian + Allahabad.
Count after: 12 PSBs.
2017 was the SBI associates round.
Each merger has one absorbing bank.
Syndicate Bank was merged into which bank with effect from 1 April 2020?
Show solutionHide solution
It went to a Bengaluru-headquartered lender.
That bank is Canara Bank.
Canara Bank
Chronology of banking events
The question asks to arrange four events in order, or asks which event came first.
Pin the big years: 1770, 1921, 1935, 1949, 1955, 1969, 1975, 1980, 1991, 2017, 2020.
The Imperial Bank (1921) sits before the RBI (1935).
The reforms follow nationalisation by 22 years.
One timeline answers every order question.
Arrange: (1) SBI formed (2) RBI nationalised (3) Imperial Bank formed. Which order is correct?
Show solutionHide solution
1921: the three presidency banks merged.
1949: RBI nationalised. 1955: SBI formed.
3, 2, 1
Shortcuts that save time
1770 first bank. 1921 Imperial Bank. 1935 RBI. 1955 SBI. 1969 fourteen. 1975 RRBs. 1980 six. 1991 reforms. 2017 SBI family. 2020 mega-merger.
What happened in Indian banking in 1975?
Show solutionHide solution
It falls between nationalisation and reforms.
Rural credit got its own banks.
Regional Rural Banks were set up
Narasimham I (1991): soundness, competition, prudential norms. Narasimham II (1998): mergers and stronger banks.
Which Narasimham report first urged prudential norms for banks?
Show solutionHide solution
The first report matches the 1991 reforms.
It is Narasimham I.
Narasimham Committee I (1991)
Mistakes to avoid
Where most students lose marks on this subtopic.
Wrong: Calling 1998 the year of the first Narasimham report. Right: Report I is 1991; report II is 1998.
Wrong: Saying Basel I dealt with market risk. Right: Basel I (1988) set credit-risk capital; Basel II added the three pillars.
Wrong: Mixing the SBI year (1955) with the Imperial Bank year (1921). Right: The Imperial Bank was formed in 1921; SBI in 1955.
Wrong: Saying India's capital adequacy norm is 8%. Right: Basel sets 8%; the RBI keeps it higher, at 9%.
Wrong: Placing the PSB mega-merger in 2017. Right: 2017 was the SBI associates merger; the 10-into-4 merger ran from 2019 to 2020.
Quick revision
Read this the night before the exam.
Bank of Hindostan 1770 first; Allahabad Bank 1865 oldest surviving.
The presidency banks merged into the Imperial Bank in 1921; SBI in 1955.
Nationalisation: 1949 RBI, 1969 fourteen banks, 1980 six banks.
Narasimham I 1991 (prudential norms), II 1998 (mergers, strong banks).
Basel I 1988, II 2004 (three pillars), III 2010. India: 9% capital from 2013.
1991: devaluation, liberalisation, new private banks.
2017: SBI associates merged. 2020: 10 PSBs into 4; 12 remain.
Practice: 12 questions
Sets of 10, mixed across the question types above. Every answer has a step-by-step explanation.
Topic test · 12 questions
Suggested time 6 min · wrong answers go to your mistake notebook automatically.