History of Banking — Set 5

Correct Answer: C. Bank of Hindustan

• **Bank of Hindustan** = established in 1770 in Calcutta by Alexander & Company, a European agency house — making it the first bank to operate in India, though under European management. • **Bank of Hindustan** was wound up in 1832 when Alexander & Company collapsed; it never evolved into a modern institution, but it marks the starting point of formal banking history in India. • 💡 Allahabad Bank is wrong — it was established in 1865, nearly a century later, by a group of Europeans in Allahabad; Bank of Bengal is wrong — it was established in 1806 as the first Presidency Bank, a government-sponsored institution, not India's first bank overall; Bank of Calcutta is wrong — Bank of Calcutta (1806) was later renamed Bank of Bengal; neither it nor 'Bank of Calcutta' is the 1770 entity.

Correct Answer: B. 1935

• **1935** = the Reserve Bank of India was established on April 1, 1935, under the RBI Act, 1934; it was set up on the recommendations of the Hilton Young Commission (Royal Commission on Indian Currency and Finance, 1926). • **Initially a private shareholders' bank**, RBI was nationalised on January 1, 1949; its headquarters were originally in Calcutta but moved permanently to Mumbai (then Bombay) in 1937. • 💡 1950 is wrong — 1950 marks the adoption of the Indian Constitution, not RBI's founding; 1947 is wrong — that is the year of India's Independence; RBI had already been operating for 12 years by then; 1921 is wrong — 1921 is when Imperial Bank of India was formed by merging the three Presidency Banks, a completely different institution.

Correct Answer: D. Imperial Bank of India

• **Imperial Bank of India** = formed in 1921 by merging the three Presidency Banks — Bank of Bengal (1806), Bank of Bombay (1840), and Bank of Madras (1843); it acted as a quasi-central bank, managing government accounts and currency before RBI was established. • **July 1, 1955** — Imperial Bank was nationalised and renamed State Bank of India under the SBI Act, 1955; SBI's associate banks were gradually merged into it, with the last five merging in 2017. • 💡 Union Bank of India is wrong — it was established in 1919 in Mumbai, independently, and was not formed from Presidency Banks; Reserve Bank of India is wrong — RBI was established in 1935 under the RBI Act, 1934, separate from any Presidency Bank merger; State Bank of India is wrong — SBI is the successor to Imperial Bank (post-1955), not the entity formed in 1921.

Correct Answer: C. Allahabad Bank

• **Allahabad Bank** = established in April 1865 in Allahabad by a group of Europeans, making it the oldest joint-stock bank and oldest public sector bank in India; it was nationalised in 1969 as one of the 14 banks. • **April 1, 2020** — Allahabad Bank was merged into Indian Bank as part of the government's bank consolidation plan; while Allahabad Bank no longer exists as a separate entity, it holds the historical distinction of being India's oldest public sector bank. • 💡 Punjab National Bank is wrong — PNB was founded in 1894, nearly 30 years after Allahabad Bank; Bank of Baroda is wrong — it was founded in 1908, more than four decades after Allahabad Bank; Canara Bank is wrong — it was established in 1906 in Mangalore by Ammembal Subba Rao Pai, also well after Allahabad Bank.

Correct Answer: B. 1969

• **1969** = on July 19, 1969, Prime Minister Indira Gandhi's government nationalised 14 major commercial banks with deposits of ₹50 crore or more, bringing nearly 80% of banking deposits under government control. • **The 14 banks** nationalised were: Allahabad Bank, Bank of Baroda, Bank of India, Bank of Maharashtra, Central Bank of India, Canara Bank, Dena Bank, Indian Bank, Indian Overseas Bank, Punjab National Bank, Syndicate Bank, UCO Bank, Union Bank of India, and United Bank of India. • 💡 1949 is wrong — in 1949 the Banking Regulation Act was passed and RBI was nationalised, but commercial banks were not; 1980 is wrong — 1980 was the second wave of nationalisation when 6 more banks were taken over on April 15; 1955 is wrong — 1955 saw SBI formed from the nationalisation of Imperial Bank, a single institution, not the major 14-bank wave.

Correct Answer: A. Mumbai

• **Mumbai** = is the permanent headquarters of the Reserve Bank of India; RBI's Central Office and the Governor's office are located in Fort, Mumbai — the financial capital of India. • **Originally established in Calcutta** in 1935, the RBI's headquarters were shifted to Mumbai (then Bombay) in 1937, where they have remained ever since; regional offices exist in Chennai, New Delhi, Kolkata, and other major cities. • 💡 Chennai is wrong — Chennai hosts an important RBI regional office but is not the headquarters; New Delhi is wrong — RBI has a regional office in Delhi, but the apex headquarters is in Mumbai; Kolkata is wrong — RBI was initially headquartered in Calcutta (1935–1937) but moved to Mumbai permanently in 1937.

Correct Answer: A. Imperial Bank of India

• **Imperial Bank of India** = was nationalised on July 1, 1955, and renamed State Bank of India under the State Bank of India Act, 1955; SBI thus inherited the entire branch network and infrastructure of Imperial Bank. • **Imperial Bank** had been formed in 1921 by merging the three Presidency Banks; SBI's associate banks (e.g., State Bank of Mysore, Travancore, Bikaner & Jaipur, Hyderabad, and Patiala) were also eventually merged into SBI, with the final merger completed in 2017. • 💡 Punjab National Bank is wrong — PNB was a separately founded Indian-owned bank (1894) and was nationalised in 1969 as part of the 14-bank wave, not converted into SBI; Central Bank of India is wrong — it was founded in 1911 as India's first truly Indian-owned scheduled bank and remains a separate public sector bank; Bank of India is wrong — it was founded in 1906 in Mumbai and nationalised in 1969, not transformed into SBI.

Correct Answer: B. C.D. Deshmukh

• **C.D. Deshmukh** = Chintaman Dwarkanath Deshmukh became the first Indian Governor of the RBI on August 11, 1943, succeeding Sir James Taylor; he served until 1949 and later became India's Finance Minister (1950–1956). • **Sir Osborne Smith** was the first Governor of RBI (1935–1937), followed by Sir James Braid Taylor (1937–1943) — both British; Deshmukh was the third Governor overall but the first Indian to hold the post. • 💡 Manmohan Singh is wrong — he served as RBI Governor from 1982 to 1985, decades after Deshmukh, and is more famous as Finance Minister (1991) and Prime Minister (2004–2014); Sir Osborne Smith is wrong — he was the first Governor of RBI but was British, not Indian; Shaktikanta Das is wrong — he is the 25th Governor of RBI (2018–2024), serving in recent times, not the first.

Correct Answer: D. 6

• **6** = on April 15, 1980, the Indira Gandhi government nationalised 6 more commercial banks with deposits of ₹200 crore or more — bringing the total number of nationalised banks to 20 (14 in 1969 + 6 in 1980). • **The 6 banks** nationalised in 1980 were: Andhra Bank, Corporation Bank, New Bank of India, Oriental Bank of Commerce, Punjab & Sind Bank, and Vijaya Bank; after this second wave, the public sector controlled about 91% of banking business in India. • 💡 8 is wrong — no such figure applies to either wave of nationalisation; 4 is wrong — only 4 banks would be far too few to account for the second wave; 10 is wrong — 10 is sometimes confused with the total from both waves but neither wave nationalised exactly 10 banks.

Correct Answer: B. Sivaraman Committee

• **Sivaraman Committee** = the Committee to Review Arrangements for Institutional Credit for Agriculture and Rural Development (CRAFICARD), chaired by B. Sivaraman, submitted its report in 1979–80 and recommended creating a dedicated apex institution for agricultural and rural credit. • **NABARD** was established on July 12, 1982, absorbing the agricultural credit departments of RBI and the Agricultural Refinance and Development Corporation (ARDC); it provides refinance to rural cooperative banks, regional rural banks, and commercial banks for agricultural loans. • 💡 Verma Committee is wrong — the Verma Committee (1996) examined weak banks and recommended restructuring, not NABARD's creation; Narasimham Committee is wrong — it focused on banking sector liberalisation (1991), not agricultural credit institutions; Hilton Young Commission is wrong — it recommended the establishment of RBI (1935), not NABARD.