Post-Independence Banking History:
Immediately after the Independence, the partition of India in 1947 adversely impacted the economies of Punjab and West Bengal by paralyzing banking activities for months.With end of British rule in India marked the end of a regime of the Laissez-faire for the Indian banking sector.
The Government of India initiated measures to play an active role in the economic life of the nation, and the Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed economy. To streamline the functioning and activities of commercial banks, the government of India has came up with the Banking Companies act, 1949. The Reserve Bank of India, India’s central banking authority, was nationalized on January 1, 1949 under the terms of the Reserve Bank of India (Transfer to Public Ownership) Act, 1948. The Reserve Bank of India was vested with major powers for the supervision of banking inn India as he central banking authority.
The Banking Regulation Act also provided that no new bank or branch of an existing bank could be opened without a license from the RBI, and no two banks could have common directors.
During those days, the general public had lesser confidence in Banking. As an aftermath, the deposit mobilization process was very slow. Moreover, the savings bank facility provided by postal department was considered comparatively safer than banks, and funds were largely given to traders.
Post-Independence Banking History can be classified into two major categories: