International Journal of Advanced Research in Management (IJARM) Volume 7, Issue 2, May–Aug (2016), pp. 36–45, Article ID: IJARM_07_02_005 Available online at http://iaeme.com/Home/issue/IJARM?Volume=7&Issue=2 Journal Impact Factor (2016): 6.9172 (Calculated by GISI) www.jifactor.com ISSN Print: 0976 - 6324 and ISSN Online: 0976 - 6332 © IAEME Publication

HISTORY OF FOREIGN BANKS IN INDIA

T. VINILA Assistant Professor of Commerce Social Welfare Residential Govt Degree College (W) Chittoor, & Research Scholar of Andhra University, Visakhapatnam, India

ABSTRACT In the earlier stages of establishment of foreign banks in India, their main business was financing of foreign trade. In fact they continued to have complete monopoly over this field till about the fifties. The evidence by various witnesses before the Indian Central Banking Enquiry Committee conclusively proved their hold over the foreign trade of India. Over and above these banks started competing recently with Indian Banks in financing of internal trade also. Manu Subedar’, in his Minority Report, Indian Central Banking Enquiry Committee, their main business is not the financing of foreign trade but internal trade of India. The operations of these banks are not confined to the financing of foreign trade. The deposits that they are able to collect in India is not very far in excess of what would be required if confined themselves to financing of foreign trade. Key words: Indian Central Banking Enquiry Committee, Indian Joint Stock Banks, Foreign Banks Cite this Article: T. Vinila, History of Foreign Banks In India. International Journal of Advanced Research in Management, 7(2), 2016, pp. 36–45. http://iaeme.com/Home/issue/IJARM?Volume=7&Issue=2

INTRODUCTION It is a well known fact that from the Earliest times, India possessed a system of indigenous banking. It will suffice in this connection to give the following, extract from “From the remote past to an Assured future” by W.E. Preston, the then Chief Manager of the Chartered Bank of India, Australia and China, and a member of the Royal Commission on Indian Currency and Finance, 1926, which is quoted on page 2 of Mr.B.T. Thakur’s book on “Organization of Indian Banking”(1) “It may be accepted that a system of Banking eminently suited to India’s then requirements was in force in that country many centuries before the science of banking became an accomplished fact in England. It is true that the methods of old in force in India were vastly different from the European ideas of banking today and partook more of money lending, money changing and later of the hundi business, nevertheless as applied to the conditions then existing in India, they admirably acted their part and must be recognized as having rendered immense services to the country as a whole, particularly when we keep in view the enormous agricultural interests of India,” Indeed money lending can be traced back to the Vedic period which is taken by some authorities to range from at least 2000 to 1400 B.C., but no evidence of its then being followed as a profession by section

http://iaeme.com/Home/journal/IJARM 36 [email protected] History of Foreign Banks In India of the people or details about the terms on which money was lent, are available. It is from the 5th century B.C., that Indian literature supplied us with definite evidence of the details of money lending and remittance of money in cash or by credit instruments, and the Buddhist works and recent archeologically discoveries reveal the existence of associations or guilds carrying on various commercial and industrial activities. The Sresthis or bankers occupied prominent positions in these guilds. In each of the important trade centres of Buddhist period e.g. Champa, Rajagriha, Sravaste, Kausambi and Avanti, there lived many Sresthis of great influence. Their main function was to finance the traders for the ordinary purposes of their trades, the merchant adventurers who went out by sea to foreign countries or explorers, who traversed forests in search of valuable materials, and the kings in times of war and other financial stress. The Buddhist texts had references to the practice of lending money with or without interest.

NEED FOR THE STUDY Though a number of studies have focused on the different aspects of foreign banks operations, this study is mainly on the origin and growth of foreign banks in India.

OBJECTIVES OF THE STUDY

The objectives of the proposed study are to • To study the historical setting of Foreign Banks • To study the origin and growth of Foreign banks. • To study the growth performance in terms of deposits and credit,

METHODOLOGY The information is gathered from different books Reserve Bank of India Publications, Indian Bankers Association, Banking at a glance etc.

FOREIGN BANKS-HISTORICAL SETTING Before independence, a number of foreign banks with head offices abroad had carried on business in India through branches. The most important of these were English banks established order Royal Chargers or English Acts. The bulk of India’s foreign trade being with or via England, it was natural that banks should be established in London to trans act exchange business with India. Until 1853, however, the East India Company, supported in prevent long the starting of such banks, with a single exception, for doing business in India, because the company and the houses were afraid that the banks would profit at their expense from their annual remittances for home expenditure and other exchange transactions. The company pointed out that Act 47 passed during the reign of George III had given it the power to incorporate such banks, and that the Act limited the Royal prerogative to grant characters to them. The matter was not decided until 1853, and the only English bank to obtain the Royal charter for operating in India until them was the Oriental Banking Corporation in 1842. The Presidency and Indian Joint Stock Banks, however, did not usually conduct exchange and remittance business between India and other countries as it was regarded risky and the business was transacted by the agency houses. By 1853 legal experts in England decided that Act 47 of George III empowered the company to incorporate banks merely on transacting general banking business within its territories, and that it did not limit the Royal prerogative to grant charters to banks for carrying on the business of exchange and remittances. Although the company did not accept this interpretation, it regarded it unsound that the monopoly of the exchange business should be enjoyed by the oriental Banking Corporation. It, therefore, suggested the incorporation of more banks, and so the Charterd Bank of India, Australia and china and the Chartered Bank of Asia (after wards the Mercantile Bank of India, London and China) were brought into

http://iaeme.com/Home/journal/IJARM 37 [email protected] T. Vinila existence by Royal Charter in 1853. The failure of the agency house also made the formation of such banks necessary. The Oriental Bank failed in 1884: the Mercantile Bank had to abandon its Charter in 1893 and it was reorganized under the English Companies Act: so that the only English Bank that has continued to do business in India under a Royal charter in the Chartered Bank of India, Australia and China. The National Bank of India was farmed in 1863 under the name of the Calcutta Banking Corporation with its head office in Calcutta, but the name was altered to its present one in 1864, and its head office was transferred to London on 1886. Later on France, Germany, Holland, Portugal, Russia the U.S.A., and Japan followed England’s example, and opened branches of their banks, chiefly at the Indian Ports, there other English Bank also opened branches in India. The Indian branches of the Deutsch Bank also opened branches in India. The Indian branches of the Deutsch-Asiatische Bank and the Russo Asiatic Bank were closed on account of the war and have not been reopened. The Sumitomo Bank and the Imperial Bank of Persia closed their branch at Bombay in 1932 and 1934 respectively, on account of the economic depression. The Yokohama Specie Bank, the Mitsui Bank and the Bank of Taiwan were closed, when Japan went to war with great Britain in 1941. In 1944, the Banking business of Thomas Cook and Son was taken over by Grindlay and Company Limited. Out of the 15 exchange banks, 7 banks have their head offices in England: 2 in Holland 2 in the USA and one each in France, Portagar, China and Hong Kong.These exchange banks were divided into two groups (i) Banks doing a considerable portion of their business in India, i.e having 25 percent or more of their deposits in India and (ii) Banks which were merely agencies in India of large banks doing the a major portion of their business abroad, i.e having less than 25 percent of their deposits in India. There were 15 Exchange banks operating in Bombai (Mumbai), Madras (Chennai) and Calcutta (Kolkata) financing foreign trade in India. They were presented in Table 2.1. These banks had a total deposits Rs. 166.09 crores accounting for 14.3 percent of the total deposits mobilized by the banking system in India in 1947. Similar, the banks also accounted for a sizeable share of the total credit lent by the banks in India. The volume of Credit lent by them loan Rs. 77.82 crores constituting 14.6 percent of the total bank credit. It can be observed from the Table 2 that there were 15 Exchange banks operating in Bombay, Madras and Calcutta financing foreign trade. These banks had a total deposit of Rs. 166.09 crores accounting for 14.3 percent of the total deposits mobilized by the banking system in India in 1947. Similarly, these banks also accounted for a sizeable share of the total credit lent by the banks in India. The volume of credit lent by them was Rs.77.42 crore constituting 14.6 per cent of the total bank credit. The Imperial Bank of India, the biggest bank had over 435 branches, including the branches in Burma. Its total deposits were Rs. 287.53 crore and the advances were Rs. 74.34 crore in 1947.

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Table 1.1 The Exchange Bank Operating in India in 1947 S.No Name of the Bank 1. Chartered Bank of India, Australia, & China 2. Eastern Bank 3. Grindlays & Company 4. Hongkong & Shanghai Banking Corporation 5. LIYODs Banks 6. Mercantile Bank of India 7. National Bank of India 8. Netherlands India Commercial Bank 9. Netherlands India Commercial Bank 10. Banks Nnacional UL tramasxino 11. American Express Co. In 12. National Bank of New York 13. Bank of China 14. Bank of Communications 15. Comptroir National D Escomple d paies Source: RBI, Statistical Tables Relating to Banks in India, 1847 Bombay 1847 “The internal trade of India, as well as what foreign trade there was at that time was financed by Indian bankers, Mahajans, Seths, Chetties or whatever they were called in different parts of India. There is ample evidence to prove that individuals often deposited their savings with these bankers, and the bankers, as a normal practice, advanced large sums to traders, land- lords and even to princes for the purpose of war or peace economy”(2). There is no definite information available about the rates of interest charged in those days by the indigenous bankers on loans. The fact that according to Ain-e- Akbari, the state granted loans to officials at rates of interest varying from 6 percent in the second year to 50 percent in the fifth year, and 100 percent in the tenth year in order to operate as a check on the users however, shows that still higher rate of interest had to be paid by these people on loans obtained from other sources. There is also evidence to show that in the last quarter of the 16th century the Vaniks in Bengal used to charge needy persons interest at the rate of more than 500 percent. The system of currency and coinage during the Mughal period, with its large number of mints scattered all over the country which issued metallic currency of various classes, also provided the indigenous bankers with the important and profitable business of money changing. Further, it became the practice during this period of employing some of the important indigenous bankers in various parts of the empire as revenue collectors, bankers and money changers to government. Banking on European lines is of comparatively recent growth in India. Indigenous banking, however suited to the needs of the country, could not satisfy the needs of the English trader. Our trade with England dated back particularly to the time when the success of the enterprising old Dutch merchants in Java led London merchants to adventure their means and resources in the formation of the East India Company. That body started in 1559 with a modest capital of 72000 with a title “The Governor and Company of Merchants of London, Trading in to the East Indies”. A year later it was granted a Royal Charter from Queen Elizabeth which gave it the privilege of trading for fifteen years to all parts of Asia, Africa etc. Impecunious monarchs utilized the renewal of Charters as means for extracting funds and loans from the company. As time went on, it became a very powerful concern, so long as it was content to trade, affairs went fairly well; but the greater the power the more dangerous the abuse, and abuses undoubtedly crept in, especially when in course of time the company and its officials became so dominant a power in India, that it finally ceased to purely trading concern and exercised administrative functions. This position could not,

http://iaeme.com/Home/journal/IJARM 39 [email protected] T. Vinila in the nature of things, be permanent, and the great cataclysm of the Indian Mutiny was followed by the entire transference of Indian administration from the company to the Crown, on the 2nd August, 1858. (3) While the company and the English traders required some machinery to satisfy their credit needs, they could not make use of the indigenous system. They, on their side, were not conversant with the language of the indigenous bankers, while the bankers had no experience of the finance of western trade. In order to overcome these two fold difficulties, two remedies were adopted. In the first place, the English agency houses which were established in Calcutta and Bombay took upon themselves the business of banking in addition to their commercial and trading activities. In the second place, the importance of forming connections with the indigenous bankers, who hold a high place in the financial and political activities of the country was not ignored.(4) Indeed in the earlier years, after their rise to power the East India Company did not favour the establishment in India of European banks, and they held the opinion that the agency houses and the indigenous bankers were better fitted to meet the banking needs of the community. These measures, however, failed to arrest the decline in the business and influence of the indigenous bankers. The incessant wars and the disorder which followed on the down fall of the Mughal Empire severely affected their business. The indigenous bankers shaken by political convulsions were left to die a gradual and ignominious death. Thus under the aegis of the East India Company, Agency Houses were brought into existence to serve as bankers to the company. These agency houses became the agents for the whole civil and military services and also for the European planters and merchants settled in the country. They had originally no capital of their own and they depended almost wholly on the savings of the servants of the East India Company. They received deposits, made advances for the movement of crops, and issued paper money which was considered extremely beneficial for carrying on their operations. These agency houses thus became the forerunners of joint-stock banks established on European lines. The earliest known bank belonging to the agency houses is the “Bank of Hindustan” started in 1770 by Messer Alexander and Co., one of the leading agency houses of the time. But later investigations, particularly by H. Sinhala –Early European Banking in India have thrown doubt on the accuracy of this statement. Over and above the banks under Charters of the East India Company, there was another group of banks known as the Presidency Banks. These were established under Acts of Indian legislature. Although the lion’s share of the capital was subscribed by the Europeans themselves, a part of the capital was subscribed by the government also. They were state-aided and the East India Company had a right to appoint some directors. The first Presidency Bank, the Bank of Calcutta was established in the year 1806 but received its Charter in 1809 when its name was changed to the Bank of Bengal. Bank of Bombay was established in 1840 and the Bank of Madras in 1843. All these three Presidency Banks were amalgamated into the Imperial Bank of India in 1920. One of the restrictions under the Presidency Banks Act was that they were prohibited from dealing in foreign bills and borrowing abroad as exchange business was regarded risky. In addition to the banks established in India under Charters of the East India Company and acts of Indian Legislature, a number of foreign banks with head offices abroad have carried on business in India through branches. They are all incorporated outside India, Their beginning dated back to 1842 in which year the Oriental Banking Corporation was started under the Royal Charter but it failed in 1884. The East India Company was generally successful in preserving banks in India chartered by it from the competition of English banks. Although proposals for incorporating banks in London to do exchange business in India did come up like the Anglo Indian Bank in 1836 and the Bank of Asia in 1840, the East India Company prevented the materialization of such schemes. The Company was afraid that such banks would make profit at their expense on their annual remittances for home expenditure. As already been stated that the first Anglo Indian Commercial Bank to receive a Royal charter was the Oriental Banking Corporation in 1842. The Bank obtained its charter from the Imperial government without any reference to the Indian authorities. The East India Company took up its old attitude and went so far as to doubt the Royal prerogative to grant charters to banks for operating in

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India on the ground that under Act 47 of George- III, it had been empowered to incorporate such banks and that the Act formed a limitation on the Royal prerogative. Legal experts in England, however, draw a distinction between the business of general banking within the territories of East India Company and the business of exchange, deposit and remittance which could be carried on by any bank under Royal Charter. Although the East India Company did not agree with this view. It considered it undesirable to give a monopoly in exchange business to the Oriental Banking Corporation and it recommended the incorporation of other banks without delay. So the Chartered Bank of India, Australia and China and the Chartered Bank of Asia (afterwards the Mercantile Bank of India, London and China) were incorporated in 1853. Of the three Chartered Banks, the Oriental Banking Corporation failed in 1884 and the Chartered Bank of Asia had to relinquish its charter in 1893 and reconstructed itself under the English Companies Act as the Mercantile Bank of India. The only English Bank now operating in India under a Royal charter is, therefore, the Chartered Bank of India. At present, 43 foreign banks belonging to different countries like England, France, Japan, America, Pakistan and Bangladesh are operating in India (Appendix 2.1). Some of the banks are, the National and Grind-lays Bank, First National City Bank, the Chartered Bank, American Express International Banking Corporation, Bank of American National Trust and Savings Association, the Mercantile Bank, the Bank of Tokyo, the British Bank of the Middle East, General Bank of the Netherlands, Banquo National do Paris and the Mitsui Bank. The Bank of Pakistan and Habit bank have been under the custodian of Enemy Property with effect from September 1965. Financing of the foreign trade of India used to be the main business of the foreign banks. The profits of these banks made naturally attracted other countries having trade relations with India to start their own banks. Some countries opened branches here with the idea of promoting their own foreign trade by providing all sorts of privileges to their nationals. Whatever be their motives, the operations of these banks, till recently, had far reaching consequences on India’s industrial development in general and growth, magnitude and type of foreign trade in particular. Until 1935 the Imperial Bank was prevented by law from dealing in bills of exchange payable outside India. Of course it was permitted to make remittances outside India for the bonfide personal needs of its constituents. True, the Indian banks were not prevented by law from engaging in foreign exchange business and a few banks like the Indian Specie bank, The Tata Industrial Bank and the Alliance Bank of Smile did engage in this business. On the whole, the Indian banks were not successful participating in Exchange Business due to paucity of capital resources, want of access to the London money market and trained staff. Moreover, whatever meagre resources they had were fully utilized and employed in internal business. As a consequence, the foreign exchange business remained practically a monopoly of the foreign banks till India became free. Though Foreign Banks played an important role in promoting the foreign exchange business, foreign trade- relate financing and bills discounting etc, they were always criticized to be more favourable to European traders at the cost of the Indian business interest. The hostile attitude of these foreign banks led the Indian interests to prefer complaints against them before the Central Banking Enquiry Committee and the essence of these complaints are summarised as follows:

• In brief, the chief counts of indictment against the powerful foreign banks were that they compete with the Indian banks not only in the matter of securing deposits but in financing borrowers in the slack season.

• That they remit funds from India whenever tight money exists in foreign countries, that they drain away resources from India for services which can be performed equally and efficiently by domestic banks; that they drain away funds for investment in foreign industrial and guilt-edged securities.

• They promote trade in raw materials and the industrialization of the country with no definite policy, that they refuse to give confirmed letter of credit even to first class Indian importing firms unless they deposit 10 percent to 15 percent of the value of goods of their own.

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• They refuse to adopt themselves to the requirements of a great agricultural country like India where produce advances are more necessary and should be made freely.

• They do not give an adequate return for the ‘open door’ policy they maintain; that they do not give reliable information concerning foreign markets and prices.

• That they form a compact homogeneous group and give no positive encouragement to the Indian bank clerks to rise to positions of official responsibility.

• They drain away funds from up country centres to the ports in the busy season for providing financial facilities to exporters rather than to cultivators and industrialists.

• They give very poor references regarding Indian customers so that D.A. terms are not granted; that they stoop to unfair tactics against budding rivals.

• They tend to take call money from the Indian banks although they refuse to give the same to the Indian banks and that they will not fit in a nationally managed banking service. In short they refuse to become instruments for industrial development and economic progress of India.(6)

FUNCTIONING OF FOREIGN BANKS As pointed out, by the Indian Central Banking Enquiry Committee, virtual monopoly in financing of foreign Trade and the foreign exchange business was possible for Foreign Banks (Exchange Banks) for the reasons, inter alia that they had an edge over the Indian Joint Stock Banks in this area due to their long- drawn out exposures in similar activities in their parent countries and other parts of the world. However, the Presidency Banks and later the Imperial Bank of India was legally restricted almost till 1935, in participating in the foreign exchange business. Nevertheless, the role of the foreign banks in financing and promotion of Indian foreign trade had been substantial and important.(7) Reliable data on the functioning of the foreign banks are available only since 18709 but not uniformly on all aspects of their business operations. There were only three banks in operation in 1870 with aggregate deposits of Rs. 5.2 million constituting 4.2 per cent of total banking deposits. In the early stages, foreign banks were primarily dependent on their home country for funds to meet any demand for additional finance, which did not auger well for the development of the domestic credit and money markets in India. However, later on the foreign banks became very active in mobilizing deposits in the domestic market, competing with the Indian Joint Stock Banks. (8) The number of banks had increased in 1880 and the deposits rose to Rs 34.0 million. Though the number of banks increased very slowly, the deposits had increased rapidly during the entire decade of 1890.Only one bank was added while deposits accelerated to Rs 75.4 million.(Table 1.1)

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Table 1.2 Foreign Banks in Colonial India (Rs in millions) Year No of banks Deposits 1870 3 5.2 1880 4 34.0 1890 5 75.4 1900 8 105.1 1910 11 247.9 1913 12 310.4 1920 15 748.1 1926 18 72.00 1929 18 67.00 1930 18 681.1 1932 18 73.00 1934 18 714.0.0 1935 17 76.00 1940 20 853.3 1947 15 1812.8 Source: 1. Banking and Monetary statistics, various volumes. 2. Statistical Abstract Relation to Banks in India, 1935. It was in 1900 that the number of banks increased to eight and deposits multiplied to Rs 105.04 million. Though the decade of 1910 had to face the wrath of the First World War, that did not deter the Foreign Banks operations. On the contrary, there was an appreciable growth of deposits among these banks during the war. For instance a year before the First World War, during 1913 the deposits of twelve Foreign Banks had grown to as much as 70 percent of that of the three presidency banks and to nearly one third of the entire banking system. During the war, the number of banks declined to nine, but deposits surged manifold to Rs 533.8 million. The outbreak of war affected the operations of foreign banks only in terms of their need for high cash balances (63.21per cent in 1917), reducing their turnover, though the war affected India’s foreign trade gravely. The low turnover was also largely due to a lower demand of credit as industrial production was hampered due to the government assigning greater priority to the production of war related material. The post war period witnessed a spirit in the operation of the foreign banks reflected in the growth of number of banks as well as the deposits. The decade ending 1920 saw the number of banks and the deposits increasing to 15 and Rs 748 million respectively. But towards the end of 1920s, the global depression had an advance effect on Indians foreign trade. As a result, the entire banking system including foreign banks, were affected. Consequently, by 1930s, the deposits of the Foreign Banks decelerated to Rs.681.1 million, with the number of banks at 18. The 1930’s were prone to many economic and political upheavals, such as recession, decline in foreign trade and the outbreak of the Second World War towards the end of the decade. All these developments had an adverse effect on the Banking system in India. The reliability of the data of the 1940s up to 1946 has been questioned by many, including Chaudhari, ( 9) as the period was reeling under heavy inflation. Conterminously, during this period the Foreign Banks also performed better in terms of total deposits touching Rs.1812.8 million in 1946, which constituted nearly one-third of the total deposits of the commercial banking system in India at that point of times despite the number of Foreign Bank dropping to 15. The data relating to deposits is bloated due to war time inflation. Nevertheless, Foreign Banks in India could hold up the confidence of the public even during a period of war time uncertainties. Foreign banks maintained around one–third of the business of the banking system more or less throughout the period under analysis, and until the early 1940s, their deposits remained high between 1880

http://iaeme.com/Home/journal/IJARM 43 [email protected] T. Vinila and 1940. The operations of the Indian Joint Stock Banks also expanded rapidly during the period 1895 to 1946. However, the impact of their growth seemed to have affected, by and large, only the Presidency Banks, rather than the Foreign Banks. This is mirrored in the apparent shift in the proportion of deposits among and between the domestic banks. The relative share of deposits in respect of Indian Joint Stock Banks increased from as little as one per cent to as high as 62 percent, while the relative share of deposits in respect of Presidency Banks sharply came down from as high as 95 percent in 1870 to around 23 percent in 1946. Thus, there was more competition among and between the domestic banks rather than between Foreign Banks and Domestic Banks. After all the foreign banks were located mostly in the port towns and major cities and they established patronage of a “niche clientele”. They were thus somewhat insulated from the competition of domestic banks. The upcoming Indian Joint Stock Banks were mostly located in the interior of the country and in the suburban centres seeking new lid clients in places where their presence of Foreign banks was ceased either non existent or very negligible. While both Foreign Banks and the Presidency Banks always maintained relatively own cash balances except during the war, the Indian Joint Stock Banks always maintained shoddy cash balances. This could be one of the strong reasons for the frequent bank failures among the Indian Joint stock banks, though the stronger and bigger banks continued in business and new banks continued to enter. Indian Banking Committee also highlighted a number of reasons for such failures, which inter alia were insufficient capital and reserves, inadequate assets, payment of exorbitant interest rates to attract deposits, injudicious lendings, speculative investments and dishonest and incompetent management.

LOANS AND ADVANCES The foreign banks had as much as 28.4 per cent of the total credit including both bills discounting/ purchasing and loans advances of the banking system in 1935. This however plummeted to 12.4 per cent in 1946 despite an increase in absolute terms to Rs 675.9 million. The growth rate increased from 3.9per cent in 1940 to 12.06 per cent in 1945, reflecting the immediate post war recovery. However, growth decelerated again, in 1946 to 8.86 percent. As against this, the Imperial Bank’s share that was placed at 20.15 per cent of total credit in 1935, had come down to 17.1 percent in 1946, while the Indian Joint Stock Banks were going faster. The latter’s share had increased steadily from 50.9 percent in 1935 to as high as 71.9 percent in 1945, though it declined marginally to 70.6 percent in 1946. Interestingly despite their faster growth, the Indian Joint Stock Banks were unable to make much headway in the exchange / foreign trade – related finance business and their share in those areas continued to be marginal. Indian Joint Stock Banks were by and large specialized in short-term credit to trade and industry. Both Foreign Banks and Indian Joint Stock Banks were not financing agriculture and other allied rural activities, as pointed out by the Indian Central Banking Enquiry Committee Report. Similar was the case with the Presidency Banks.

CONCLUSION Though the foreign banks withered a good growth performance in terms of deposits and credit, their relative share in aggregate deposits and credit in the banking system was getting thinner, and was overwhelming being taken over by the domestic banks even before the country’s independence. During the war, the flurry of banking activities was high, which induced the entry of a larger number of weak Indian joint stock banks than foreign banks.

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REFERENCES

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