🏦 Banking in India — A Beginner’s Guide for Students

Hello students! 👋

Have you ever seen your parents go to a bank? Or heard words like SBI, loan, or ATM? Let’s understand what all this means — in a super simple way!

In this lesson, we’ll explore:

✅ What banks do
✅ How banking started in India
✅ Types of banks
✅ Major changes and reforms
Let’s begin!

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💡 What Is a Bank?

A bank is a place where:

• People keep their money safe

• Banks give loans to those who need money

• They help in buying, saving, sending, and receiving money

So, banks are like the money managers of our country!

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🌟 Why Are Banks Important?

Banks help:

• The country’s economy to grow

• Keep people’s savings safe

• Give loans to shopkeepers, students, farmers, and businesses

• Manage money transfers (like UPI, cheques, net banking)

• Help the government reach people even in faraway places

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🧾 What Is Banking?

As per India’s law (Banking Companies Act, 1949), banking means:

Taking money from people as deposits, and giving it to others as loans or investing it.

So, banks collect money from those who save, and give money to those who need — like a money bridge!

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🕰️ How Did Banking Start in India?

Banking in India has a long journey. Let’s learn it in 4 easy phases:

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🔹 Phase 1: Early Days (1786–1935)

• Many small banks started, but 1100 banks failed because they were weak.

• British rulers started 3 big banks:

  • Bank of Bengal – 1809

  • Bank of Bombay – 1840

  • Bank of Madras – 1843

• Later, they merged to form Imperial Bank → which became SBI in 1955

• In 1935, the Reserve Bank of India (RBI) was born — it controls all banks.

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🔹 Phase 2: Before Nationalisation (1935–1969)

• RBI began managing the money system.

• Some banks were regulated (controlled by rules), but most were still private.

• This period prepared India for big banking changes.

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🔹 Phase 3: Nationalisation (1969–1990)

• In 1969, the government took control of 14 big banks.

• In 1980, 6 more banks were taken over.

• This helped:

  • Expand banks to villages and small towns

  • Make banks available to all people — not just the rich

  • Build public trust

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🔹 Phase 4: Modern Banking (1990–Today)

• India opened up to private banks and foreign banks

• Banks became digital — now we have:

  • ATMs

  • Net banking

  • Mobile apps

  • UPI and QR payments

• But some rural areas still lack private or foreign bank branches.

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🧑‍🏫 A Quick Timeline from Prof. K.V. Bhanu Murthy

He explained banking in 4 eras:

1. Early Era (1770–1905)

2. Pre-Independence (1906–1946)

3. Regulated Era (1947–1993)

4. Deregulated Era (1993–now)

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🏛️ Types of Banks in India

Let’s make it very simple!
Banks in India are divided into two main categories:

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✅ 1. Scheduled Banks

These are trusted banks listed under the RBI’s special list.

To be included:

• Bank must have at least ₹5 lakh capital

• Must follow rules and not harm customers

They include:

• Public Sector Banks (like SBI)

• Private Banks (like HDFC, ICICI)

• Foreign Banks (like HSBC, Citibank)

• Regional Rural Banks (help villages and farmers)

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❌ 2. Non-Scheduled Banks

These are smaller banks that are not in RBI’s special list but still operate legally.

In simpler words:

They are smaller banks that do not meet certain conditions set by RBI to be officially included in its schedule — but they are still legal and allowed to operate.

🏦 Examples of Non-Scheduled Banks:

1. Capital Local Area Bank Ltd.
   – Operates in Punjab; focused on small-scale local banking

2. Shamrao Vithal Co-operative Bank Ltd. (before being included in scheduled list)
   – Originally a non-scheduled urban cooperative bank

3. Rabobank International Holding India Pvt. Ltd.
   – A smaller foreign-owned bank without scheduled status earlier

4. The Kalupur Commercial Cooperative Bank Ltd.
   – Initially operated as a non-scheduled bank

📌 Note: Many of these banks later apply for scheduled status once they meet RBI conditions (like ₹5 lakh capital, stable operations, etc.). So the list keeps evolving.

🧠 Easy Example

Imagine a school.
Scheduled Banks = Students on the official class list  

Non-Scheduled Banks = Visitors learning on their own — not on the roll call, but still part of the system 

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⚠️ How Are They Different from Big Banks?

Feature	Scheduled Banks	Non-Scheduled Banks
On RBI List	✅ Yes	❌ No
Emergency Help	✅ Yes (from RBI)	❌ No
Area Covered	🌐 Big (All India)	🏡 Small (Local)
Safety	✅ High	⚠️ Lower

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🏢 Who Owns the Banks?

🔵 Public Sector Banks (PSBs)

• Government owns them (more than 51% shares)

• Includes SBI and 19 Nationalised Banks

• Total: 21 Public Banks

🟠 Private Sector Banks

• Owned by private companies or people

• Follow Companies Act, 1956

• Example: HDFC Bank

🟢 Regional Rural Banks (RRBs)

• Made for rural areas and farmers

• Earlier 196 banks → now only 64 (merged)

• Example: Arunachal Pradesh Rural Bank, sponsored by State Bank of India, located in Arunachal Pradesh.

🌍 Foreign Banks

• From outside India

• Work in India with branches and offices

• Example: Bank of America

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🏗️ Special Banks for Development

These banks focus on specific sectors:

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🛠️ Banking Reforms in India

India’s banking has changed a lot!
Here’s what happened:

• Banks now help in both cities and villages

• Many digital features like online transfers

• Some problems like NPA (loans not returned) increased after 2011

• But overall, India’s banks have made big progress

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📌 Conclusion – What Did We Learn?

✅ A bank keeps your money safe and gives loans
✅ Banking in India started long ago with British banks
✅ RBI is like the headmaster of all banks
✅ Government nationalised banks to reach the common man
✅ Today, banking is digital, fast, and modern

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Even in the future, banks will still be here — online or offline — to help manage your money. 🏦📲💰