There were no public sector banks till 1955. Only on 1st July 1955 Imperial Bank of India was nationalised creating State Bank of India. It is important to know what was banking in our country before Independence.
Sutra texts (700-100 BC) and the Buddhist Jatakas (600-400 BC) mention interest payment. Manusmriti approved money lending as a business. It defined interest rate of 2% per month to a Brahmin borrower, 3% per month to the Warrior Caste (Kshatriya), 4% per month to a merchant and 5% per month to Sudras.
Isn’t it discrimination? Do we want this kind of discrimination to come back to banking in India? Money lending was a flourishing business in India which also lead to slavery and bonded labour. Moneylenders were powerful. They had command over the villages.
But modern banking came into being only in the end of the 18th century. One of the first banks that was opened here was the Bank of Hindustan established in the year 1770 but liquidated in the year 1832. General Bank of India was established in 1786 but collapsed in 1791. Bank of Calcutta was started in 1806 by the Presidency government of the British and renamed as Bank of Bengal in 1809. Two more Presidency Banks were formed- Bank of Bombay in 1840 and Bank of Madras in 1843. They were merged in 1921 to create the Imperial Bank of India which became the State Bank of India in the year 1955. So the bank which has survived the longest is a government bank started by the British government.
Union Bank of Calcutta was started in 1829 as a Private Bank. This bank was promoted by owners of Commercial Bank and the Calcutta Bank. Union Bank of Calcutta failed in 1845. Allahabad Bank was established in 1865 as the oldest joint stock bank and remained a public sector bank after nationalisation. Now it is merged with the Indian Bank which is also a public sector bank.
The first entirely Indian joint stock bank was established in 1881 at Faizabad named the Oudh Commercial bank. It failed in 1958. Punjab National Bank established in 1894 is surviving as a Public Sector Bank today.
Between 1906 and 1911 the ‘Swadeshi’ movement helped to establish some private banks which actually helped people and functioned as banks for common man. They are, Catholic Syrian Bank, The South Indian Bank, Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India. While CSB and SIB are struggling to survive, the others became public sector banks during nationalisation. You will be shocked to know that 94 private banks in India failed between 1913 and 1918.
Reserve Bank of India was established only in 1935 and was nationalised only in 1949 and functioned as the Central Bank. Only in 1949 the Banking Regulation Act came into existence. RBI was empowered to regulate, control and inspect banks in India. So, it is clear that before Independence almost the entire banking was in the private sector and most of them failed.
The privatisation move of the present government will take us back to the days of bank failures and no security to the common depositor. It will also take us to the Manusmriti idea of lending at different rates – of course cheaper loans for the rich and upper caste and higher interest to the poor.
Let us not forget history. Privatisation of IDBI which was started as a Development Bank will be the beginning of privatisation of the entire banking system. The fight has to be now or never.
Thomas Franco is former General Secretary of All India Bank Officers’ Confederation.
Picture courtesy: Wikipedia