Bank Madras amalgamated to form Imperial Bank

is a German word which means ‘to collect’. Now a day, a bank occupies important
position in the economic structure of the country. A commercial bank is a
profit-seeking business organization, which dealing in money and credit. Banks are
financial institution, which accepts deposits of money from general public to
keep them in its safe custody. It also deals in with credit, i.e., it creates
credit by giving as advances from the funds received as deposits to needy customers
(Somsheskar, 2009).

term ‘Bank’ has been defined in different ways by different economists. A few
definitions are:

to Walter Leaf (1999) “A bank is a person or corporation which holds itself out
to receive from the public, deposits payable on demand by cheque.” Horace White
has defined a bank, “as a manufacture of credit and a machine for facilitating
exchange.” (Somsheskar, 2009).




General Bank of India was set up.


Presidency Bank of Calcutta was
established in 1806; it was renamed in 1809 as Presidency Bank of Bengal.


Presidency Bank of Bombay


Presidency Bank of Madras


presidency banks viz. Bank of Calcutta, Bank of Bombay and Bank of Madras
amalgamated to form Imperial Bank of India


Reserve Bank of India was formed based on the recommendation of Hilton
Young Commission (setup in 1926).


Nationalization of Reserve Bank of


Nationalization of Imperial Bank
of India, which now became State Bank of India


Nationalization of 14 major Banks


Nationalization of another 6 major


committee-I gave its recommendation


committee-II gave its recommendation

Pankaj Goel & Shobhna)

(1999) cited in NSE, (2010) defines banks as an establishment which makes to
individuals such advances of money as may be required and safely made, and to
which individuals entrust money when not required by them for use.”

Banking Companies Act of India defines Bank as “A Bank is a financial
institution which accepts money from the public for the purpose of lending or
investment repayable on demand or otherwise withdrawable by cheques, drafts or
order or otherwise” (Somsheskar, 2009).


Liberalization and Globalization, the Indian Banking sector is doing their
business in a very slow manner. In 1990, the revolution is came by
privatization, liberalization & globalization in banking sector. In this
era foreign banks & private banks came in existence by issuing licenses
from Reserve Bank of India. By do this Indian banks are faced intense
competition from these banks due to Introduction of Digital/Information
technology in banking sector. Though these changes started with the recommendations
of  Narasimham Committee’s (1992) for
computerization, after that another Saraf Committee’s (1994) given suggestions
for Electronic Clearing Services (ECS), Electronic Fund Transfers (EFT) and banks
can given services of IT as mobile banking, internet banking, automated teller
machine (ATM) etc. (Source:

banking” refers to systems that enable bank customers to access accounts and
general information on bank products and services through a personal computer
(PC) or other intelligent device” (Chakraborty, 2015).

may allow banks to offer new products and services, to expand their markets for
traditional activities and to consolidate their competitive position in
offering available payment services, while ensuring operating costs cut for
banks (BCBS, 1998). Information Technology is refers to storing, processing and
transferring of information with the use of personal computers, telephones,
mobile phones, fax machines etc. Technology has changed the banking process
from traditional banking. It gives extra edged to the banking industry to
enhance customer base as well reach geographical distant and complex markets.
It is a fastest and cheapest way for delivery of banking products and services.

Customers can
also get benefits by get instant account statements, transfer funds, fixed
deposits and purchase drafts by just browsing bank’s website through their pc
or mobile app’s. (Dhadwal & Rajinderkapil, 2017). E-banking includes the
systems that enable financial institution customers, individuals or companies
to access their accounts, transact business, or obtain information related to
financial products and services through a public or private network, like
internet or mobile phone etc. (Chovanova, 2006).

(Source: Gvozdanovic & Solomon, (2016).

Supply Chain Management

Aim of Supply
chain Management (SCM) to provide transmission of goods and information with
highest level of customer satisfaction at the lowest possible cost. A supply
chain is the network of the things involved in delivering finished goods to the
customer (Lindeke RR (2014) Supply chain management). The definition of the
Supply Chain Management (SCM) “in the process of planning, organizing,
implementing and controlling of the four things (material, capital, information
and manpower) from the point of production (supplier) to the point of Sale
(customer), forward & reverse, effectively & efficiently in order to
satisfy customer needs. “Supply chain Management as the integration of business
process from the end user through original supplier who provides products,
services and information that adds value for the customers” according to
(Douglas M Lambert). Supply chain finance allows a supplier to sell its
invoices to a bank at a discount as soon as they approved by the buyer, so that
the risk of seller is reduced as the time of sale. The purpose of FSC to make
transparency in processes between purchase to-order and order-to-cash
(Kristofik & Hoff, 2012).Globalization is driving banks to examine new ways to cater to corporate
clients, including financial supply chain management (FSCM). Financial
Supply Chain Management is generally defined as a set of financial activities happened
various parties involved in a supply chain – i.e. the customer, producer and
the financing institution to reducing financing costs and improved business efficiency (Vousinas & Ponis, 2017). “The goal of
financial supply chain management is to make celerity in processes involved from
purchase to payment and sale to cash, as well as processes involved in
ordering, invoicing, reconciliation and payment” (Kristofik & Hoff, 2012). “Growth
of the bank stands on the relationship
between Supply Chain Management (SCM) practices, and Organizational performance and it is also found that information and
communication technology (ICT) had a major role in determining the performance
of bank. The study recommends that to use correct ICT methods should be applied
to promote the competitiveness of banks and improve performance” (Kimechwa
et al., 2015).


in India established in 18th century, and Bank of Hindustan was
incorporated in 1770 followed by Bengal bank in 1784 and further General bank
of India came into existence in 1786. But they were not able to run for long
time & failed.

1804, Where British ruler was established, Presidency Bank of Calcutta which
was renamed as Presidency Bank of Bengal in 1809, then Presidency Bank of
Bombay (1840), and later Presidency Bank of Madras in 1843. In 1920, the first
Merger in Indian Banking history came in existence, when all these three banks
were amalgamated to make a single entity called Imperial Bank of India, a
foreign private Bank.

The Presidency Banks
(19th Century)

Bank of Bengal
(1804)        Bank of Bombay (1840)         Bank of Madras (1843

Imperial Bank of India (Amalgamation)


The State Bank of
India- 1955 (Nationalisation)

Associate Banks (mergers)

The State Bank of India Group



Dr. P. N. Reddy, 1998. Banking Theory and Practice).

the first Indian Bank was then opened in 1865 by the name of Allahabad Bank and
Punjab National Bank that was started and operated from Lahore. Later Central
Bank of India, Bank of India, Bank of Baroda, Indian Bank, Bank of Mysore and
Canara Bank started within 1906 to 1913.

the initial stage, the development of banking sector was very slow and was
facing tough time between 1913 to 1948. Between 1913 to 1918 minimum 94 banks
in India failed during the First World War (1914-1918). The failure of banks in
1913 revealed the weaknesses of the banking system such as the proper
management of unduly low proportion of cash and other liquid assets, the
distribution of large unsecured advances to the companies in which the
directors were interested. After hectic and uncontrolled expansion, there
followed the inevitable crash. The committee is formed to investigate the
reasons of failure of banks. As per the suggestions of the report of this
Committee the need for enacting a special Bank Act, covering the organisation,
management, and audit liquidation of banks was felt. On the strong recommendations
of committee, the establishment of a supreme body with the view point of development
of banking facilities in India.

In 1926,
The Hilton Young Commission was suggested to originate a separated bank in
country by the name of Reserve bank of India. Then in 1933 bill was presented
in Legislative assembly, which led to formation of Reserve Bank of India (RBI)
in 1935. The Preamble of the Reserve Bank of India describes the basic
functions of the Reserve Bank as, “to regulate the issue of Bank notes and
keeping of reserves with a view to securing monetary stability in India and
generally to operate the currency and credit system of the  country to its advantage; to have a modern
monetary policy framework to meet the challenge of an increasingly complex
economy, to maintain price stability while keeping in mind the objective of
growth” (

Bank of India authorized The Imperial Bank of India to work on behalf of RBI,
where they had no branches.

when India got Independence in 1947 from British rule, it was the time when
Indian banking sector saw tremendous growth. The Government of India took first
step for Nationalization of Reserve bank of India in 1948, to make solid
foundation of Indian banking system and for this Banking Regulation Act was
established in 1949 (Reserve bank of India act 1949). Further State bank of
India (SBI) was first nationalized bank. It was in 1955, when the Imperial bank
in India was renamed as SBI.

1.1.1    Nationalization,
Liberalization and Globalization in Banking:-

1960, till the time State bank of India was the only Government bank, which
were authorized by the RBI and rest of the other banks were owned and functioned
by the private Individuals. It was seen the growth of Indian Economy it is
necessary to regulate Indian Banking industry more effectively.

in 1967 Government of India took major steps for the development of banking
industry in which, they nationalized some private banks and finally they ended
up by nationalizing 14 major banks on 19 July, 1969 and in second phase 6 more
banks were nationalized on 15 April, 1980. Later in 1993, the government
amalgamated New Bank of India with PNB. By doing this the number of government
banks got reduced from twenty to nineteen.

implies that the distinction between domestic and international arena becomes
blurred and it is hard to think anything remaining purely domestic.
Globalization means the free movement across national borders of the following
four elements of economy:

(i)   Physical capital as represented by
investments in plant and machinery;

Financial capital as represented by investment of financial institutions in
capital market;

Technology; and



1990, the Government worked on the policy of liberalization and gave license to
many small private banks. New generation these banks were Tech-savvy banks, and
Global trust bank got started at this time. After sometime these banks were
merged with Oriental bank of Commerce (OBC), ICICI Bank, UTI Bank (Renamed AXIS
Bank) and HDFC Bank.

step taken by the government boosted the Indian Economy and banking sector both,
which all the three sectors of banks showed tremendous growth (Foreign banks,
Govt. banks & Private Banks).

Banking Structure in India (As on
March 31, 2010)