Before going to ink the history of evaluation of banking system in the then British India, let us go through a bit about the history of the then India to avoid confusion. In fact, the undivided India was ruled out by British from 1757 to 1947. India was divided in two separate countries, India and Pakistan in 1947. Subsequently Bangladesh became independent in 1971 through a libration war. As such the evolution of banking history began its inception from the then undivided India when British ruled this sub continent. Banking was known in India long ago, when the rest of the world was in dark about it. Even in Manu Sanghita, we find that there was deposit banking in ancient India.
Banking in India is traceable in ancient Vedic era. Ancient bankers performed the functions such as accepting deposits, granting loan against security, acting as bailey to customers or as treasurers and bankers to the state, and managing the currency of the country. Also they used loan deeds. During Buddhist Period, Brahmins and kshatiyas entered banking business. The concept of hundis or indigenous bills of exchange was there. During Mughal rule, Indigenous banks granted loans for both domestic and foreign trade assisted the state metallic coin and acted as money changer, revenue collectors and bankers to the state. The banking house of Jagath Seth’s had great influence and power.
The Bank Hindustan was the first modern bank formed in 1770 by an English Agency House in Calcutta but was wound up in 1832. The East India Company and European private share holders mostly owned the banks. Afterwards, three Presidency Banks namely Bank of Bengal, Bank of Bombay and Bank of Madras had the monopoly of government banking and the issue of notes. In 1876 the Presidency Banks Act was passed and the government had withdrawn its capitals. The government’s balances were kept in there reserve treasuries. The policy of the Presidency Banks Act was to safeguard the interest of the government and also it imposed restriction on all other three banks of that time to carry out the business of banking only. In that period, the English agencies established mostly the joint stock banks. After 1813, several joint stock banks were established by the British settlers in India, but most of them could not do banking business only. By 1861, there was a mushroom growth of banking companies in Indian subcontinent. Under the Indian management, the Oudh Commercial Bank was first formed in 1880 followed by the Punjab National Bank and the Alliance Bank of Simla. The three Presidency banks and Indian Joint Stock Banks were established by the Acts of Indian legislature. In 1860, the principal of limited liability was first applied to the banks the three presidency banks were amalgamated into Imperial Bank of India by the Imperial Bank of India Act 1920. After passing of State Bank of India Act, the understanding of Imperial Bank of India was taken over by the newly constituted State regulatory of banking companies started by Indian Companies Ltd. in 1936 which prohibited banking companies from carrying on business other then banking. Several events were remarkable in the historical development of banking in India during the British rule.
(Dr. Hashibul is a professor, Dept. of Textile, Peoples University of Bangladesh).
