Structure and Evolution of Indian Banking

Indian banking is governed by RBI (apex bank, est. April 1, 1935; nationalised Jan 1, 1949). Scheduled banks = listed in the 2nd Schedule of RBI Act 1934 (need paid-up capital + reserves >= Rs 5 lakh and operations not detrimental to depositors). They split into Scheduled Commercial Banks (SCBs) and Scheduled Cooperative Banks. SCBs = Public Sector Banks (PSBs), Private Sector Banks, Foreign Banks, Regional Rural Banks (RRBs), and Small Finance Banks. Memory aid: 'Scheduled banks get RBI loans + clearing-house access.' Non-scheduled banks (rare today) are not in the 2nd Schedule. SARFAESI, CRR/SLR apply to scheduled banks. Speed tip: any question naming the '2nd Schedule' refers to RBI Act 1934, NOT the Banking Regulation Act 1949.

Key dates to lock in: Imperial Bank of India became State Bank of India on July 1, 1955 (under SBI Act 1955, on Hilton-Young/All India Rural Credit Survey recommendation). First wave of bank nationalisation: 14 banks on July 19, 1969 (deposits >= Rs 50 crore). Second wave: 6 banks on April 15, 1980 (deposits >= Rs 200 crore). Total = 20 banks nationalised. RRBs created Oct 2, 1975 (Narasimham Committee 1975) under RRB Act 1976. NABARD set up July 12, 1982. Memory trick: '69-fourteen, 80-six' and 'SBI fifties (1955), RRB seventy-five.' After mega-mergers (2017-2020), India now has 12 PSBs (down from 27).

Committee names recur heavily in SBI PO. Narasimham Committee I (1991) — financial sector reforms, prudential norms, reduce SLR/CRR. Narasimham Committee II (1998) — banking sector reforms, NPA management, Asset Reconstruction Companies, CAR to 9%+. Other high-yield mappings: Khan Committee (universal banking), Vaghul Committee (money market), Damodaran Committee (customer service), Nachiket Mor Committee (financial inclusion, led to Payments Banks & Small Finance Banks), Bimal Jalan Committee (RBI economic capital framework). Memory aid: 'Narasimham = banking reforms; Nachiket Mor = inclusion (Payments/SFB); Bimal Jalan = RBI reserves transfer.'

Cover the answer, recall, then check. 12 cards on the durable facts of Indian banking's structure and evolution.

Q1. When and under which Act was the RBI established, and when was it nationalised?
A1. Established 1 April 1935 under the RBI Act, 1934; nationalised (fully owned by the Government of India) on 1 January 1949.

Q2. How was the State Bank of India created?
A2. SBI was formed in 1955 by nationalising the Imperial Bank of India (on the recommendation of the All-India Rural Credit Survey / Gorwala Committee). The Imperial Bank itself was created in 1921 by merging the three Presidency Banks — Bengal, Bombay and Madras.

Q3. Give the two rounds of bank nationalisation and the deposit thresholds used.
A3. First round: 14 banks on 19 July 1969 (deposits ≥ Rs 50 crore). Second round: 6 banks on 15 April 1980 (deposits ≥ Rs 200 crore). Total 20 banks.

Q4. What makes a bank a "Scheduled" bank?
A4. It is listed in the Second Schedule of the RBI Act, 1934 (it must have paid-up capital and reserves above a threshold and satisfy RBI that its affairs are not run against depositors' interest). Others are non-scheduled.

Q5. When were Regional Rural Banks set up and who owns them?
A5. RRBs began 2 October 1975 (statutory basis: RRB Act, 1976), following the Narasimham Working Group. Shareholding: Central Government 50%, Sponsor Bank 35%, State Government 15%.

Q6. Name the first RRB of India.
A6. Prathama Grameen Bank, headquartered at Moradabad, sponsored by Syndicate Bank.

Q7. What is the deposit cap and lending restriction for a Payments Bank?
A7. It can accept a maximum deposit of Rs 2 lakh per customer, cannot lend or issue credit cards, and cannot accept NRI deposits. Concept came from the Nachiket Mor Committee.

Q8. How do Small Finance Banks differ from Payments Banks?
A8. SFBs can both accept deposits AND lend; they must extend at least 75% of credit to priority sectors and keep at least 50% of the loan book in tickets up to Rs 25 lakh. Payments banks cannot lend at all.

Q9. Which committees are associated with 1990s banking-sector reforms?
A9. The Narasimham Committee — I (1991) and II (1998) — recommended reforms on capital adequacy, NPA norms, prudential regulation and reduced government control.

Q10. What is the Lead Bank Scheme?
A10. Introduced in 1969 (based on the Gadgil Study Group and Nariman Committee), it assigns a "lead bank" to each district to coordinate credit and financial-inclusion efforts there.

Q11. List the main categories of banks in India today.
A11. Public sector banks, private sector banks, foreign banks, Regional Rural Banks, cooperative banks, plus the newer differentiated banks — Small Finance Banks and Payments Banks.

Q12. Which bodies regulate cooperative banks?
A12. Dual control — RBI (banking functions) and the Registrar of Cooperative Societies / NABARD (management). Since the 2020 amendment, RBI's supervisory powers over cooperative banks were strengthened.