THE STATE BANK OF INDIA : AN INTRODUCTION

On the recommendation of the Rural Credit Survey Committee the Imperial Bank of India was converted into the State Bank of India, on July 1, 1995. Its 92 per cent shares were acquired by the Reserve Bank of India, and thus it had the distinction of becoming the first State owned commercial bank in the country. Among the factors which guided the establishment of the state Bank of India the main consideration was that the county should have a big commercial bank committed to national purpose and should take banking to the countryside even if initially it was not a commercially viable proposition. In view of this necessity the State Bank was required to function as a development agency besides performing the traditional function of a commercial bank. It was made a statultory obligation that it would open at least 400 branches within five years from the date of its establishment. Most of these branches were to be set up at unbanked centres. In course of time this initiative of the state bank induced other commercial banks also to move to semi-urban and rural centres. Apart form the development agency function which no other commercial bank performed in the country, the State Bank was entrusted with the task of the RBI’s agent. In the capacity it now receives and makes payment on behalf of the Central and State governments.
In 1959 the State Bank of India (Associate Banks) Act was passed and this paved the way for creating the State Bank Group. Now State Bank of Hyderabad, State Bank of Bikaner and Jaipur, State Bank of Indore, State Bank of Mysore, State Bank of Patiala, State Bank of Saurashtra and State Bank of Tranvancore constitute the State Bank Group.
Though the State Bank of India was established as a commercial bank, but with its efforts a new era of mixed banking system ushered in the country . financing to agriculture and other priority sectors could also be a viable commercial activity was proved by the experience of the State Bank of India. This in fact had weighed considerably when the decision to nationalize 14 commercial banks was taken in 1969. Over the years the State Bank of India has expanded its business in a big way. When its was set up in 1955, it had got 466 braches from the Imperial Bank. The State Group comprising the State Bank of India and 7 associates has expanded the number of branches from 2,462 on June, 30, 1969 to 14,082 at present. The State Bank of India and its Associate Bank thus together accounted for around 20 per cent of the total branches of all commercial banks in the country. The share of the banking business with them was also roughly 29 percent. These facts today bear the testimony to their importance in the country’s banking structure. In 1993 the State Bank of India Act was amended to enable it to have access to the capital market. The State Bank of India thus raised over Rs. 2,400 crore through public issue, The RBI shareholding is now 67 per cent as against 99 per cent earlier.

For any Query mailed to examinindia@gmail.com