India@75 (1955: Nationalisation of the State Bank of India)

The origin of India’s largest bank, the State Bank of India, can be traced back to the 27th of January, 1921. Formerly known as the Imperial Bank of India, it was created because of a merger between the three presidency banks, Bank of Bengal, Bank of Bombay and Bank of Madras. It was the last of many attempts to establish a Central Bank in India.

With the growing operations and business of the East India Company in India, it was becoming increasingly important to have a uniform value of measurement. Gold and silver coins that were in circulation at the time differed in the denomination and intrinsic value across India. This meant that universal coinage was the need of the hour. As a result, in 1806, the silver rupee was introduced as the official coin. The Paper Currency Act of 1861 vested the right to issue notes with the government, and in 1873, a Central Bank of sorts was sent up to standardise the rupee revenue collections for the government and aid foreign remittance for private merchants. However, it shut its doors in a few years.

It was much later, in the year 1913, that one of the great economists of the 20th century, Keynes, published a paper “Indian Currency and Finance”. His paper argued for India to be able to handle her commercial and central banking; a merger of the three Presidency banks into Imperial Bank of India was much needed.

The onset of WWI in 1914 continued to delay its creation. However, by the end of the war, there was renewed international pressure, especially at the International Finance Conference (which was set up to reset global economic order) on the British Indian government to establish a Central Bank.

Finally, a royal charter in the year 1921 pronounced the Imperial Bank the sole banker of the government, maintaining treasury balances and acting as the bankers’ bank. They proposed the opening of hundreds of branches across India. In 1933, Sir Badridas Goenka was appointed as the Chairman of The Imperial Bank of India, the first Indian to hold the position. As operations grew in India, it became imperative to separate central banking operations and commercial banking operations to avoid conflict of interest.

In 1935, the RBI took over central banking functions, and the Imperial Bank continued to retain commercial operations. Subsequently, in 1955, post-India’s independence, the Government of India nationalised the Imperial Bank and renamed it SBI. Today it has an extensive network of 22,000 branches and 44 crore customers across the Indian subcontinent.