Banking in India
Modern banking in India began in the mid-18th century with the establishment of the Bank of Hindustan in 1770, one of the earliest banks in the country. However, it was later liquidated between 1829 and 1832. Another early institution, the General Bank of India, was established in 1786 but failed in 1791. The oldest bank still in existence today is the State Bank of India (SBI), which traces its origins to the Bank of Calcutta, established in June 1806. It was renamed the Bank of Bengal in 1809 and became one of the three Presidency Banks, along with the Bank of Bombay (1840) and the Bank of Madras (1843). These three banks were merged in 1921 to form the Imperial Bank of India, which was later transformed into the State Bank of India in 1955 after India’s independence. Before the establishment of the Reserve Bank of India (RBI) in 1935, the Presidency Banks and the Imperial Bank performed many functions similar to a central bank.
The Indian banking sector underwent major changes after independence. In 1960, SBI was given control of eight state-associated banks under the State Bank of India (Subsidiary Banks) Act, 1959. These associate banks were eventually merged with SBI on 1 April 2017, creating the largest bank in India. The government also nationalised 14 major private banks in 1969 and another six banks in 1980 to expand banking services and strengthen financial inclusion. Today, public sector banks continue to play a dominant role in India’s banking system due to their extensive branch networks and large customer base.
Indian banks are broadly classified into scheduled and non-scheduled banks. Scheduled banks are those included in the Second Schedule of the Reserve Bank of India Act, 1934, and include public sector banks, private sector banks, Regional Rural Banks (RRBs), and foreign banks. Commercial banks, both scheduled and non-scheduled, operate under the Banking Regulation Act, 1949. With the merger of its associate banks, SBI significantly improved its global standing and was ranked 163rd in the Fortune Global 500 list in 2025.
India’s banking system is considered well-developed in terms of products, services, and outreach, although extending banking services to rural and economically weaker sections remains a challenge. To address this, the government and institutions such as SBI and the National Bank for Agriculture and Rural Development (NABARD) have promoted rural banking and microfinance initiatives. Indian households traditionally prefer keeping their savings in bank deposits because they are considered safe and secure. According to RBI data, fixed deposits account for more than ₹103 trillion, while current and savings accounts together hold over ₹78 trillion. Studies and surveys conducted by regulatory bodies such as RBI and SEBI consistently show that a large majority of Indians prefer bank deposits over investments like equities and mutual funds, reflecting their preference for safety, liquidity, and stable returns.