Banks have since ages been one of
the vital props of any economy.
They enable the streamlining of financial resources in a profitable
way, and bridge the gap between their demand and supply. They also act as
an intermediary in financial transaction, besides providing an array of other
services.
Although the roots of banking in
India can be traced to ancient Mauriyan Age, banks, as one understands
today, originated in India in the early parts of the
18th century, and in the course of time, several banks came up and
got closed down. There are, however, still a few banks that bear the footprints
of pre-independence days, and the most significant among them are
Reserve Bank of India (RBI) formed in 1935 and the State Bank of India (SBI),
successor to the Imperial Bank of India established in 1921.
Regulating the banks is important because banks are a keystone in the
edifice of financial stability of the economy. A well-regulated banking system
also "enhances the allocative capacity of the financial system" and thereby adds
to the growth of the economy. The banking regulative regime in India
underwent various changes and crystallized in 1949 with the Banking Regulation
Act, 1949 (passed initially as the Banking Companies Act, 1949 and changed
subsequently to the Banking Regulation Act, 1949). The Banking
Regulation Act, 1949, in conjunction with the Reserve Bank of India Act, 1934,
empowers the RBI to superintendent the banking system of the country and to act
as its guardian.
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