Banking in India, in the modern sense, originated in the last decades of the eighteenth century. Among the first banks were the Bank of Hindostan, which was established in 1770 and settled in 1829-32; And the General Bank of India, established in 1786, but failed in 1791. The largest bank, and the oldest still in existence, is the State Bank of India (S.B.I). It originated as the Bank of Calcutta in June 1806. In 1809, it was renamed the Bank of Bengal. This was one of three banks funded by a presidential government, the other two were the Bank of Bombay and the Bank of Madras. The three banks were merged in 1921 to form the Imperial Bank of India, which to India's independence, became the State Bank of India in 1955. For many years the banks of the presidency had acted as quasi- Central banks, as well as their successors, Reserve Bank of India was established in 1935, under act of Reserve Bank of India, 1934.
In 1960, state banks in India received control of eight state banks under the Indian State Bank (Subsidiary Banks) Act of 1959. These banks are referred to as partner banks. In 1969 the Indian government nationalized 14 large private banks. In 1980, 6 more private banks were nationalized. These nationalized banks are the majority of lenders in the Indian economy. They dominate the banking sector because of their large size and widespread networks. The Indian banking sector is broadly classified into scheduled banks and unscheduled banks. The scheduled banks are those included in Act 2 of the Bank of India Act of 1934. Scheduled banks are further classified into: nationalized banks; State Bank of India and its associates; Regional Rural Banks (RRBs); Foreign banks; And other Indian private sector banks. The term commercial banks refers to the scheduled and non-regular commercial banks regulated by the Banking Regulation Act of 1949.
In general, banking in India is quite mature in terms of supply, product range and outreach, although outreach in rural India and for the poor remains a challenge. The government has developed initiatives to address this through the State Bank of India expanding its network of branches and through the National Bank of Agriculture and Rural Development (NBARD) with facilities such as microfinance.
