This Day in History (27-Jan-1921) – The Imperial Bank of India (State Bank of India) came into existence

The evolution of State Bank of India can be traced back to the first decade of the 19th century. It began with the establishment of the Bank of Calcutta in Calcutta, in 1806. The bank was redesigned as the Bank of Bengal, three years later. It was the first ever joint-stock bank of the British India, established under the sponsorship of the Government of Bengal. Subsequently, the Bank of Bombay (established in 1840) and the Bank of Madras (established in 1843) followed the Bank of Bengal. These three banks dominated the modern banking scenario in India, until when they were amalgamated to form the Imperial Bank of India, on 27 January 1921, with combined role of a commercial bank and a central bank.

However, with the establishment of the Reserve Bank of India in 1935, the Imperial Bank ceased to have a central banking function. It now became a purely commercial bank and certain business restrictions on it were removed. An important turning point in the history of State Bank of India is the launch of the first Five Year Plan of independent India, in 1951. The Plan aimed at serving the Indian economy in general and the rural sector of the country, in particular. Until the Plan, the commercial banks of the country, including the Imperial Bank of India, confined their services to the urban sector. Moreover, they were not equipped to respond to the growing needs of the economic revival taking shape in the rural areas of the country. Therefore, in order to serve the economy as a whole and rural sector in particular, the All India Rural Credit Survey Committee recommended the formation of a state-partnered and state-sponsored bank. The committee proposed the take over of the Imperial Bank of India, and integrating with it, the former state-owned or state-associate banks.

Subsequently, an Act was passed in the Parliament of India in May 1955. As a result, the State Bank of India (SBI) was established on 1 July 1955.  Later on, the State Bank of India (Subsidiary Banks) Act was passed in 1959. The Act enabled the State Bank of India to make the eight former State-associated banks as its subsidiaries, with the State Bank of Hyderabad becoming the first subsidiary of the SBI.


This Day in History (13-Aug-1943) – Chintamanrao Deshmukh was first Indian to be appointed Governor of Reserve Bank

Chintaman Deshmukh had an outstanding educational career. He stood first in the Matriculation examination of the University of Bombay in 1912, and also secured the first Jagannath Sankersett Scholarship in Sanskrit. At the University of Cambridge in 1917, he graduated in the field of Natural Sciences Tripos with Botany, Chemistry and Geology, winning the Frank Smart Prize in Botany. He appeared for the Indian Civil Service Examination, then held only in London, in 1918, and topped the list of successful candidates. For most of his 21 years with the Indian Civil Service, Deshmukh was with the then Central Provinces and Berar Government where, among other things, he was probably the youngest among those who held the positions of Revenue Secretary and Finance Secretary. Chintaman Deshmukh’s association with the Reserve Bank of India began in July 1939, when he was appointed Liaison Officer in the Bank to keep the Government of India in touch with the Bank’s affairs. Three months later, he was appointed Secretary of the Central Board of the Bank and two years later in December 1941, as the Deputy Governor. He was Governor from August 1943 to June 1949.

Chintaman Deshmukh proved to be an outstanding Governor. He presided over the transformation of the Reserve Bank from a private shareholders’ bank to a nationalised institution and secured the enactment of a comprehensive legislation for the regulation of banking companies and the establishment of the first financial institution for the provision of long-term credit to industry, namely, the Industrial Finance Corporation of India (IFCI). He also initiated a number of steps for building up an adequate machinery for rural credit. Chintaman Deshmukh played an important role in the Bretton Woods Conference in July 1944, which lead to the establishment of the International Monetary Fund (IMF) and International Bank for Reconstruction and Development (IBRD). In both of these institutions, Chintaman Deshmukh was a Member of the Board of Governors for ten years and was the Chairman at the Joint Annual Meeting of these two institutions held in Paris in 1950.