Imperialism and Rise of Modern Banking

What is Imperialism? 

Imperialism is a policy of extending a country’s land by capturing land of other nation on basis of military power, economic power or by any other mean. It was a common practice during 3rd century BCE to 19th century CE.

Imperialism brought many technologies, knowledge, administration, arts, culture i.e. socio-cultural revolution along with it. After 16th century CE when trade became very prominent and west started to expand, it created many colonies around the globe. Like, Britain had colonies in India, The U.S, Parts of Africa and Australia. 

Regardless of atrocities it brought to people of that nation, it brought some good practices like modern banking system.

Even thought these nations used monetary systems much more for its benefits that for colonies it ruled, many of the good facilities it provided were beneficial in long run. In 1776, The U.S got independence and in 1791 the first nationwide commercial bank was introduced, it was jointly hold by government and private stockholders. 

During 1935, Reserve Bank of India (RBI) was formed to act as a Central Bank.

Rise of Modern Banking Sector in India

England saw the birth of first modern bank and quickly spread the same model around its colonies to benefit them financially. The first bank in India was formed in 1770 and was liquidated in 1829-1832.

The largest and oldest working bank in India is State Bank of India (S.B.I) which originated as Bank of Calcutta in 1806. It was one of the 3 banks founded by presidency government of British India. In 1921 all three banks were merged to form the Imperial Bank of India, which after 1947 became State Bank of India.

Because of colonial extorsion, famines, people with low income group grew at very large number in rural parts of the country. Facilities such as postal saving system helped people to save some money and earn interest over it.

In 1865, Allahabad Bank was established, it is the oldest functioning joint stock bank of India. Similarly, Oudh Commercial Bank was established in 1881 in Faizabad. It was first entirely joint stock bank of India. The bank failed during 1958. Punjab National Bank, (which recently was merged into United Bank of India and Oriental Bank of Commerce) was founded in Lahore 1894.

Rise of Foreign Banks in India

India also saw some foreign bank establish their ventures during colonial era. Calcutta was the most active and old port of British India, i.e. many foreign banks picked Calcutta as their first branch in India, Banks like Grindlays Bank focused on British Army and Indian commodities opened in Calcutta in 1864.

Comptoir d'Escompte de Paris a bank from France which was created from the response of French Revolution, which operated on a new credit system opened a branch in Calcutta in 1860 and in Bombay 1862, later in Madras and Pondicherry. HSBC also opened a branch in Calcutta in 1869.

Merchant banks were introduced as Union Bank of Calcutta 1829. Around 20th century many small banks emerged in India, many of them formed building societies like in Europe, funds of these societies were used to finance ethnic and religious communities.

Swadeshi Movement

During 1906 to 1911, Mahatma Gandhi lead the swadeshi movement were businessman were inspired to found banks of and for Indian communities. Many banks like Bank of India, Corporation Bank, Central Bank of India, were found and have survived till this day.

During World War 1, in span of 5 years, 94 Indian banks failed because of falling economy, as all economic activities was directly or indirectly boosting the war, it had a huge impact on trade and other manufacturing services. 

Same, during World War 2 many Indian banks failed and government was forced to absorb bad assets.