The beginning of the 20th century ushered a phase of economic modernization and political uprising for the Indian Subcontinent. The roots of these reforms lied in the end of the 19th century which was marked by major reforms in the social, political, and educational sphere with the formation of organizations and institutions like Indian National Congress, Arya Samaj and the Deccan Education Society to name a few. The growing discontent towards the British government and the desire for freedom were felt throughout the country for a long time. Eventually, the partition of Bengal in 1905 strengthened these feelings of anti-colonialism, leading to the emergence of the Swadeshi Movement in the country. The Swadeshi movement, which was launched as a protest, eventually took the form of a boycott movement. This boycott was not only witnessed in terms of rejecting goods manufactured in England but also promoting Indian businesses or ‘Make in India’. The Indian banking sector was no exception to this movement.
On one hand the British Government was maintaining efforts on the political and financial front by pushing the need of a Central Bank in the country and eventually establishing the Reserve Bank of India. Although Indian politicians and businessmen pressed for greater autonomy of the RBI from the government, it took quite some time and deliberations to reach there. Apart from pushing for centralized financing in the country, several Indian businessmen and activists came together to establish the sovereign identity of Indians by establishing commercial banks in the country. These banks have held a prominent place in the Indian Banking Sector since then. Each of these banks has a history attached to its formation and collectively they paved way for commercial banking in the country.
Of the earliest commercial banks in India, which are still operating, are the Allahabad Bank and the Punjab National Bank established in 1865 and 1894. The oldest Joint Stock Bank in the country, the Allahabad Bank was formed by a group of Europeans to undertake organized businesses in the country. With an entire European management, Allahabad Bank was not formed with the intention of serving the needs of the Indians. On the other hand, the Punjab National Bank was created by the new educated class in the Punjab province with the ambition of starting a Swadeshi Bank with Indian Capital and management representing all sections of the Indian community. The idea for PNB was tabled by Rai Mool Raj and furthered by Lala Lajpat Rai with the support of Lala Harkrishan Lal, who had returned from England with ideas regarding commerce and industry. The Punjab National Bank was thus formed with the conviction that if India had to progress upon independence, she should have her own institutions, especially financial institutions.
Following the establishment of these banks, the next wave of commercial bank establishment in India came only after the Partition of Bengal. During this time, the major banks that were formed were the Indian Bank, Bank of India, Canara Bank, Bank of Baroda, and the Central Bank of India. The Bank of India was established in 1906 by a group of eminent businessmen from Mumbai. Stories around its establishment are few, however an interesting fact to note is that it was the first Indian Bank to open a branch outside the country in London in the year 1946. Another bank established in the same year was the Canara Bank by Ammembal Subba Rao Pai, a philanthropist, on 1st July.
Realising that smaller borrowers—small traders and peasants—were facing high rates of lending in excess of 50 per cent, Subba Rao Pai envisioned a bank for this section of the society which witnessed tremendous growth by 1939 in the form of well-functioning 38 branches in the Southern part of the country.
Subsequently, many banks came into being during this wave of Swadeshi and the next important one was the Bank of Baroda established in 1908. The bank was an initiative of Maharaja Sayajirao Gaekwad III, the ruler of the State of Baroda, who played a fundamental role in the modernization and the social upliftment of Baroda, and the establishment of the bank was a step in that regard. Another truly Swadeshi Bank that made a mark on the Indian Banking Sector was the Central Bank of India established in 1911. It was the first Indian commercial bank which was wholly owned and managed by Indians and led by Sir Sorabji Pochkhanawala. Sir Pochkhanwala’s vision for establishing the bank extended beyond promoting the industry itself but promoting commerce and trade in the country. Many such visionaries came forward to strengthen the financial standing of the country during the first half of the 20th century.
While the economic foundations were being laid across India in preparation of freedom, the world was reeling under tremendous economic and political pressures with the onset of the First World War and the Great Depression of 1929. India was no exception to this and between 1914 and 1935 almost 380 banks failed in the country out of which 54 were based in Bombay province. The impact of the depression being felt greatly in Maharashtra led to the reinvigoration of the Swadeshi movement after its effects faded away. This translated into the establishment of the Bank of Maharashtra in the state under the leadership of Prof.V G Kale, an ex-member of Indian Tariff Board, and Shri D K Sathe, a businessman and a prominent social worker. Finally, the last leg of independence in the form of the Quit India Movement of 1942 led to the establishment of the United Commercial Bank Ltd. in Kolkata.
Thus, the Indian commercial banking commenced under differential circumstances but with a common belief in Swadeshi. All these banks have contributed greatly to the progress of the country with their constant commitment to bank the unbanked and finance the economic drivers. Although, today their functionality and need are often questioned due to their poor financial state of operability, it is equally important to acknowledge the vital part played by these banks before the 1991 reforms and subsequent privatization of the sector. Even before achieving political independence, Indians all over the country had taken steps to achieve financial independence for the nation.
- Manasi Kutwal
manasikutwal53@gmail.com
Life of Sir Sorabji Pockhanwala: https://www.youtube.com/watch?time_continue=18&v=Qc0QsBk4rGY&feature=emb_logo
Life of Subba Rao Pai, Founder of Canara Bank : https://www.youtube.com/watch?v=LQlqxDxcnz0