Banks in India after independence

Banking Sector in India reformed much after independence due to the major steps taken by Indian Government. To provide extensive banking facilities in rural and semi-urban areas, Imperial Bank was changed into State Bank of India and it became the first nationalised bank of India. Thereafter State bank of India started to act as the principal agent of Reserve Bank of India and to handle banking transactions of the Union and State Governments all over the country.

In 1960 seven subsidiary banks of State Bank of India were nationalised.

On 19th July, 1969, major process of nationalisation was carried out and 14 major commercial banks in the country were nationalised. Second phase of nationalisation Indian Banking Sector Reform was carried out in 1980 with seven more banks. As a result 80% of the banking segment in India came under Government ownership.

The following are the steps taken by the Government of India to Regulate Banking Institutions in the Country:

1949 : Enactment of Banking Regulation Act.
1955 : Nationalisation of State Bank of India.
1959 : Nationalisation of SBI subsidiaries.
1961 : Insurance cover extended to deposits.
1969 : Nationalisation of 14 major banks.
1971 : Creation of credit guarantee corporation.
1975 : Creation of regional rural banks.
1980 : Nationalisation of seven banks with deposits over 200 crore.

Due to the nationalisation of banks, the branches of the public sector banks in India rose to approximately 800% in deposits whereas advances took a huge jump by 11,000%.

The nationalisation of the banks by Government of India gave the public implicit faith and immense confidence about the sustainability of these institutions.