History of Banking — Set 4

Correct Answer: B. Bank of Baroda

• **Bank of Baroda** = founded in 1908 by Maharaja Sayajirao Gaekwad III of the Baroda princely state; it began with a modest capital of ₹10 lakh and has grown into one of India's largest public sector banks. • **July 19, 1969** — Bank of Baroda was among the 14 banks nationalised by Indira Gandhi's government; today it operates globally with branches in over 20 countries. • 💡 State Bank of Mysore is wrong — it was an associate of SBI linked to the Mysore royal family, not Baroda; State Bank of Bikaner is wrong — it was a Rajasthan-based SBI associate, entirely unrelated to Gaekwad III; Bank of India is wrong — it was founded in 1906 by a group of Bombay businessmen, not by any princely ruler.

Correct Answer: B. Presidency Bank of Bengal

• **Presidency Bank of Bengal** = credited with introducing the first savings account facility in India in 1833, allowing ordinary people to deposit small amounts and earn interest — a revolutionary concept at the time. • **Bank of Bengal** was established in 1806 in Calcutta as the first of the three Presidency Banks; it later merged with Bank of Bombay and Bank of Madras to form Imperial Bank of India in 1921. • 💡 Allahabad Bank is wrong — it was established in 1865 and is notable as India's oldest surviving joint-stock bank, not for introducing savings accounts; Union Bank of India is wrong — it was established in 1919, nearly a century after 1833; Bank of Hindustan is wrong — it was India's first bank (1770) but did not introduce the savings account concept.

Correct Answer: C. ICICI Bank

• **ICICI Bank** = became the first Indian bank to list on the New York Stock Exchange (NYSE) in 1999, issuing American Depositary Receipts (ADRs) to access international capital markets. • **ICICI Bank** was originally set up in 1994 as a private sector bank; it is now India's largest private sector bank and the listing on NYSE marked a landmark in Indian banking's global integration. • 💡 HDFC Bank is wrong — while also a major private bank launched in 1994, it did not list on NYSE first; State Bank of India is wrong — it is a public sector bank and did not achieve the NYSE listing; Axis Bank is wrong — formerly UTI Bank, it is a private bank but was not the first to list on NYSE.

Correct Answer: D. RBI Act 1934

• **RBI Act 1934** = Chapter III-B of the Reserve Bank of India Act, 1934 (inserted by amendment) specifically deals with the registration, regulation, and supervision of Non-Banking Financial Companies (NBFCs). • **NBFCs** accept deposits and lend money but do not hold a banking licence; RBI oversight under the 1934 Act prevents systemic risk — a lesson reinforced after the IL&FS and DHFL crises of 2018–19. • 💡 Companies Act 2013 is wrong — it governs corporate governance and company law broadly, not financial supervision of NBFCs; FEMA 1999 is wrong — it regulates foreign exchange transactions, not domestic NBFC supervision; Banking Regulation Act 1949 is wrong — it applies specifically to scheduled commercial banks, not to NBFCs.

Correct Answer: A. Corporation Bank

• **Corporation Bank** = was the pioneer in implementing Core Banking Solution (CBS) in India, enabling customers to transact from any branch rather than only their home branch — a major leap in banking convenience. • **Corporation Bank** was established in 1906 in Udupi, Karnataka; it was later merged into Union Bank of India in April 2020 as part of the government's bank consolidation drive. • 💡 HDFC Bank is wrong — it is a technology-forward private bank but was not the first CBS adopter; ICICI Bank is wrong — it also adopted CBS early but came after Corporation Bank; Andhra Bank is wrong — it adopted CBS later and was subsequently merged with Union Bank of India in 2020.

Correct Answer: A. Rural

• **Rural** = NABARD stands for National Bank for Agriculture and Rural Development; it was established on July 12, 1982 under the NABARD Act, 1981, on the recommendations of the B. Sivaraman Committee. • **NABARD** took over the agricultural credit functions of RBI and refinancing role of the Agricultural Refinance and Development Corporation (ARDC); it is the apex development bank for rural India, headquartered in Mumbai. • 💡 Resource is wrong — 'R' in NABARD stands for Rural, not Resource; Reconstruction is wrong — that term is associated with IFCI (Industrial Finance Corporation of India), not NABARD; Regional is wrong — Local Area Banks and Regional Rural Banks exist as separate entities; NABARD's 'R' unambiguously stands for Rural.

Correct Answer: A. 1996

• **1996** = the RBI granted licences for Local Area Banks in 1996 to mobilise savings in rural and semi-urban areas and lend within 2–3 contiguous districts, bridging the gap left by commercial and cooperative banks. • **Four LABs** were licensed: Coastal Local Area Bank, Krishna Bhima Samruddhi LAB, Subhadra Local Area Bank, and North Malabar Gramin Bank; the LAB concept prefigured the Small Finance Bank model introduced in 2015. • 💡 1991 is wrong — that year saw the launch of economic liberalisation (LPG reforms), not LABs; 2005 is wrong — RBI issued the road map for foreign banks in 2005, not LABs; 2001 is wrong — Payment and Settlement Systems Act was passed later in 2007; no banking category was launched in 2001 matching LABs.

Correct Answer: D. Lahore

• **Lahore** = Punjab National Bank was founded on May 19, 1894, with its registered office at Anarkali Bazaar, Lahore (now in Pakistan); it was India's first bank to be fully owned and managed by Indians. • **After Partition in 1947**, PNB's headquarters were relocated to New Delhi; in 1993 New Bank of India was merged into PNB — the first merger of nationalised banks in India. • 💡 Amritsar is wrong — while Amritsar is a significant Punjab city, PNB's founding office was in Lahore; Faizabad is wrong — Faizabad was the seat of Oudh Commercial Bank (1881), not PNB; Delhi is wrong — PNB shifted its headquarters to Delhi only after the 1947 Partition, it was not founded there.

Correct Answer: B. CIBIL

• **CIBIL** = Credit Information Bureau (India) Limited was incorporated in January 2000 as India's first credit information company; it maintains records of individuals' and businesses' loan and credit card repayment histories and generates credit scores. • **CIBIL score** ranges from 300 to 900; a score above 750 is generally considered good by lenders; it was set up on the recommendations of the N.H. Siddiqui Working Group and operates under the Credit Information Companies (Regulation) Act, 2005. • 💡 RBI is wrong — RBI is the regulator; it created the framework for CIBIL but does not run it directly; SEBI is wrong — SEBI regulates securities markets, not credit information; SIDBI is wrong — SIDBI (Small Industries Development Bank of India) provides finance to MSMEs and has no role in credit bureaus.

Correct Answer: D. Narasimham Committee I

• **Narasimham Committee I (1991)** = chaired by M. Narasimham, former RBI Governor; its report is called the 'Magna Carta' of Indian banking reforms because it laid the blueprint for transforming a state-controlled banking system into a competitive, market-oriented one. • **Key recommendations** included reducing SLR and CRR to free up funds, moving to international accounting standards, setting up an Asset Reconstruction Fund, and allowing entry of new private and foreign banks — most of which were implemented post-1991. • 💡 Rangarajan Committee is wrong — C. Rangarajan chaired committees on monetary policy and statistics, not the foundational banking reform report; Nayaku Committee is wrong — no major banking reform report by that name exists; Damodaran Committee is wrong — it was set up in 2010 to improve customer service in banks, a narrow remit compared to the sweeping 1991 reforms.