Domestic Systemically Important Banks in India : India has a lot of banks – government and private owned. But a few banks have a huge impact on Indian Economy. Let’s have a a look at some of the important banks in India.
Domestic Systemically Important Banks (D-SIBs)
SBI, ICICI Bank and HDFC Bank are classified by RBI as Domestic Systemically Important Banks (D-SIBs). These banks are considered too big to fail. While private sector banks ICICI Bank and HDFC Bank fall under bucket 1, SBI falls under bucket 3.
Under bucket 1, banks require 0.2 per cent of additional common equity Tier 1 capital as a percentage of risk weighted assets (RWAs), and under bucket 3, banks require 0.6 per cent of additional common equity Tier 1 capital as a percentage of RWAs.
Let’s have a look at historical banks in India. Banks such as SBI and PNB have been present since the time of Indian independence and have also played a major role in Indian Economy.
PNB (Punjab National Bank)
- PNB was founded in 1894 and is headquartered in New Delhi.
- PNB’s founders included several leaders of the Swadeshi movement such as Dyal Singh Majithia and Lala Harkishen Lal, Lala Lalchand, Kali Prosanna Roy, E. C. Jessawala, Prabhu Dayal, Bakshi Jaishi Ram, and Lala Dholan Dass.
- Lala Lajpat Rai was actively associated with the management of the Bank in its early years.
- The board first met on 23 May 1894.
- The bank opened for business on 12 April 1895 in Lahore.
- PNB is the first Indian bank to have been started solely with Indian capital that survives to the present.
- Mahatma Gandhi, Jawahar Lal Nehru, Lal Bahadur Shastri, Indira Gandhi and the Jalianwala Bagh Committee have held PNB accounts.
BoB (Bank of Baroda)
- The Maharaja of Baroda, Maharaja Sayajirao Gaekwad III, founded the bank on 20 July 1908 in the Princely State of Baroda, in Gujarat. It is headquartered in Vadodara, Gujarat.
Union Bank
- Union Bank of India was established on 11 November 1919 as a limited company in Mumbai and was inaugurated by Mahatma Gandhi.
- At the time of India’s independence in 1947, Union Bank of India had four branches – three in Mumbai and one in Saurashtra, in trade centres.
Allahabad Bank
- On 24 April 1865, a group of Europeans founded Allahabad Bank in Allahabad.
- By the end of the 19th century it had branches at Jhansi, Kanpur, Lucknow, Bareilly, Nainital, Calcutta, and Delhi.
- In the early 20th century, with the start of Swadeshi movement, Allahabad Bank witnessed a spurt in deposits.
- In 1920, P & O Banking Corporation acquired Allahabad Bank with a bid price of ₹436 (US$6.30) per share.
- In 1923 the bank moved its head office and the registered office to Calcutta for reasons of both operational convenience and business opportunities.
- Then in 1927 Chartered Bank of India, Australia and China (Chartered Bank) acquired P&O Bank.
- However, Chartered Bank continued to operate Allahabad Bank as a separate entity.
- Allahabad Bank opened a branch in Rangoon (Yangon).
- Chartered Bank amalgamated Allahabad Bank’s branch in Rangoon with its own.
- In 1963 the revolutionary government in Burma nationalized the Chartered Bank’s operations there, which became People’s Bank No. 2.
- On 19 July 1969, the Indian Government nationalised Allahabad Bank, along with 13 other banks.
- On 30 August 2019, the Finance Minister Nirmala Sitharaman announced merger of Allahabad Bank with Indian Bank.
Bharatiya Mahila Bank
- Bharatiya Mahila Bank (BMB) was an Indian financial services banking company based in Mumbai, India.
- Former Indian Prime Minister Manmohan Singh inaugurated the system on 19 November 2013
- While being run by women, and lending exclusively to women, the bank allowed deposits to flow from everyone.
- India was the third country, after Pakistan and Tanzania, to have a bank exclusively to benefit women.
- The bank merged with State Bank of India on 1 April 2017.
SBI (State Bank of India)
- SBI was established in 1955 and is headquartered in Mumbai.
- Bank of Calcutta later renamed the Bank of Bengal, was established on 2 June 1806.
- The Bank of Bengal was one of three Presidency banks, the other two being the Bank of Bombay (incorporated on 15 April 1840) and the Bank of Madras (incorporated on 1 July 1843).
- These three banks received the exclusive right to issue paper currency till 1861 when, with the Paper Currency Act, the right was taken over by the Government of India.
- The Presidency banks amalgamated on 27 January 1921, and the re-organised banking entity took as its name Imperial Bank of India.
- Pursuant to the provisions of the State Bank of India Act of 1955, the Reserve Bank of India acquired a controlling interest in the Imperial Bank of India.
- On 1 July 1955, the Imperial Bank of India became the State Bank of India.
- In 2008, the Government of India acquired the Reserve Bank of India’s stake in SBI so as to remove any conflict of interest because the RBI is the country’s banking regulatory authority.
- In 1959, the government passed the State Bank of India (Subsidiary Banks) Act. This made eight banks that had belonged to princely states into subsidiaries of SBI
- The government integrated these banks into the State Bank of India system to expand its rural outreach.
- In 1963 SBI merged State Bank of Jaipur (est. 1943) and State Bank of Bikaner (est.1944).
- SBI acquired the control of seven banks in 1960. They were the seven regional banks of former Indian princely states. These seven banks were State Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad (SBH), State Bank of Indore (SBN), State Bank of Mysore (SBM), State Bank of Patiala (SBP), State Bank of Saurashtra (SBS) and State Bank of Travancore (SBT).
- All these banks were given the same logo as the parent bank, SBI.
- The plans for making SBI a single very large bank by merging the associate banks started in 2008, and in September the same year, SBS merged with SBI.
- The very next year, State Bank of Indore (SBN) also merged.
- Following a merger process, the merger of the 5 remaining associate banks, (viz. State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala, State Bank of Travancore); and the Bharatiya Mahila Bank) with the SBI was given an in-principle approval by the Union Cabinet on 15 June 2016.
- This came a month after the SBI board had, on 17 May 2016, cleared a proposal to merge its five associate banks and Bharatiya Mahila Bank with itself.
- On 15 February 2017, the Union Cabinet approved the merger of five associate banks with SBI. The merger went into effect from 1 April 2017.
