Ancient Indian Banking System

India, like in every other field was strong in financial transactions. This is documented right from Vedic times that date back to 2000 BCE or even earlier. The reason for banking was more towards usury, which was called as Kusidin in Sanskrit.

More mention of this comes into light in the Manu Smriti, which gives considerable importance to money lending in ancient India.

What were the Interest Rates?

Well, the simple answer is it depends, let us also learn in the article based on what parameters did the interest rates depend on.

In the initial periods the interest was flat and was much more than what many banks offer currently. It was 15% flat for all the people.

However, according to Manu, Vasishta, and many others, the main parameter was the Varna. There could certainly be reasons for this. It was based on what they earn and their living style.

Brahman 2% per month Was supposed to earn only enough for 5 days
Kshatriya 4% per month Were involved in wars fighting enemies
Vaishya 6% per month Business-class who had to donate on a daily basis
Shudra 8% per month Mostly into agriculture who had no social commitments

Apart from this, the interest rates later, in Chanakya’s period of time, were risk-weighted, in the sense that the borrower’s risk involved in taking the loan used to make a decent impact on the interest that they had to pay.

chanakya story about tru history

In cases where the borrowers had to pass through forests had to pay a bigger interest rate than the person working from within the city limits. Business involving import and export was even riskier due to which they were attracting a lot more interest rate than everything else.

Disputes and Debt-recovery

Kings used to play an important role in the recovery of the loan amount. Manu has specified punishments in cases of disputes. The king had all the privileges to recover the money with different kinds of punishment.

Death of the borrower could transfer the debts to their wife or children. The wife would only be exempted from loans if she has not given her assent at the time of borrowing. Otherwise, the burden will come down to anyone in the family, failing will attract punishments.

Eligibility to Lend Loans

Only Vaishya Varna was eligible to lend loans. The varnas involved in lending were from the varna who were categorized specifically as accountants. They involved families with the surnames as follows:

1 Shroffs
2 Seths
3 Sahukars
4 Mahajans
5 Chettis (Shreshthis)

The agreements or deeds were called by the following names:

  • ranapatra
  • ranapanna,
  • ranalekhaya

While after some time, in the Mauryan period at about 321–185 BCE, the sale deeds came to be known as Adesha. In this time merchants also used to give letters of credit to one another.

In the Mughal period, the same thing came to be known as Dastawez. Hundis also came to existence from this period of time.

The concept of savings came from the west in about the 18th century. Bank of Hindustan was the first bank that was established in 1770 and unfortunately was liquidated in 1829.

Within this time, what is called now as State Bank of India was started by the name Bank of Calcutta in 1806. Subsequently, two banks in different other provinces started:

  • Bank of Bombay in 1840
  • Bank of Madras in 1842

Since the transactions were more in Calcutta, Bank of Calcutta became the Central bank by default.

The following banks within no time, started their operations one by one:

1 Allahabad bank 1865
2 Oudh commercial bank 1881
3 Punjab National Bank 1895
4 Central bank of India 1891

Soon, the three initial banks, Bank of Calcutta, Bank of Bombay and Bank of Madras, merged together to form Imperial Bank of India.

The period between 1906 and 1911 saw the establishment of banks inspired by the Swadeshi movement.

A number of banks established then have survived to the present such as:

  • Catholic Syrian Bank
  • The South Indian Bank
  • Bank of India
  • Corporation Bank
  • Indian Bank
  • Bank of Baroda
  • Canara Bank
  • Central Bank of India

Dakshina Kannada is known as the “Cradle of Indian Banking” due to the fact that the Swadeshi movement led to the establishment of many private banks in Dakshina Kannada and Udupi district.

Dakshina Kannada is marked in Saffron

Reserve Bank was established in 1935 post-independence became a bank acquired by the Government.

In 1949, the Banking Regulation Act was enacted, which empowered the Reserve Bank of India (RBI) to regulate, control, and inspect the banks in India.

During the period 1948-1968, the main focus of banking sector was on security and to lay strong foundation for a sound banking system in the country.

It was realized that despite the existence of the banking sector, the objective of equitable and inclusive growth of the country could not be met. Therefore, the step towards the nationalization of the bank was taken in the year 1969.

At present, there are mainly two types of Banks, Public Sector Banks, and Private Sector Banks. Let us see the list of each of the banks starting from Nationalized or Public Sector Banks, including the home loan interest rates.

Indian Nationalised Banks List

  Bank Name Founded Headquarters Home Loan Interest Rate Founders
1 Bank of Baroda 1908 Vadodara, Gujarat 7.25% – 8.25% p.a. Sri Sayajirao Gaekwad III
2 Bank of India 1906 Mumbai, Maharashtra 8.00% – 8.30% p.a. Sir Sassoon J. David
3 Bank of Maharashtra 1935 Pune, Maharashtra 8.55% – 9.00% p.a. Sri V. G. Kale
4 Canara Bank 1906 Bengaluru, Karnataka 8.05% – 10.05% p.a. Sri Ammembal Subba Rao Pai
5 Central Bank of India 1911 Mumbai, Maharashtra 8.00% – 8.55% p.a. Sri Sorabji Pochkhanawala
6 IDBI Bank Limited 1964 Mumbai, Maharashtra 8.25% – 8.80% p.a. Sri GOI by Act of Parliament
7 Indian Bank 1907 Chennai, Tamil Nadu 9.00% p.a. onwards Sri S. Rm. M. Ramaswami Chettiar
8 Indian Overseas Bank 1937 Chennai, Tamil Nadu 8.20% – 10.95% p.a. Sri M. Ct. M. Chidambaram Chettyar
9 Oriental Bank of Commerce 1943 Gurgaon, Haryana 8.25% – 8.80% p.a. Sri Rai Bahadur Sohan Lal
10 Punjab & Sind Bank 1908 New Delhi, Delhi 7.55% – 8.15% p.a. Sri Vir Singh
11 Punjab National Bank 1894 New Delhi, Delhi 8.95%- 9.95% p.a. Sri Dyal Singh Majithia‎; ‎Lala Lajpat Rai
12 State Bank of India 1955 Mumbai, Maharashtra 7.35% – 7.75% p.a. Sri MaharajaMadho Rao Scindia
13 Syndicate Bank 1925 Manipal, Karnataka 8.00% – 8.60% p.a. Sri T. M. A. Pai, Sri Vaman Srinivas Kudva, Sri Upendra Ananth Pai
14 UCO Bank 1943 Kolkata, West Bengal 8.05% – 8.60% p.a. Sri Ghanshyam Das Birla
15 Union Bank of India 1919 Mumbai, Maharashtra 7.30% – 7.55% p.a. Government

The following are the Private Sector Banks whose stakes are that of Indians making them Made in India Banks or Indian Banks.

Indian Private Banks Name List

1 Axis Bank 1993 Mumbai, Maharashtra 8.40% – 11.75% p.a. Sri Rakesh Makhija
2 Dhanlaxmi 1927 Thrissur, Kerala 9.55% – 10.25% p.a. Sri Sajeev Krishnan
3 ICICI Bank 1994 Mumbai, Maharashtra 8.65% – 10.35% p.a. Sri Kundapur Vaman Kamath
4 IndusInd Bank 1994 Pune, Maharashtra 8% onwards Sri Srichand Parmanand Hinduja
5 Jammu and Kashmir Bank 1938 J & K 7.70% – 8.00% p.a. Government of Jammu and Kashmir
6 Karnataka Bank 1924 Mangalore, Karnataka 8.55% p.a. Sri B. R. Vysaray Achar, Sri K. S. N. Adiga
7 Karur Vysya Bank 1916 Karur, Tamil Nadu 8.20% – 10.05% p.a. Sri M. A. Venkatarama Chettiar, Sri Athi Krishna Chettiar
8 Kotak Mahindra Bank 2003 Mumbai, Maharashtra 7.85% – 8.55% p.a. Sri Uday Kotak
9 Lakshmi Vilas Bank 1926 Chennai, Tamil Nadu 9.70% p.a. Sri G B C Muthuveera Chettiar, Sri T Sundararajulu Chettiar, Sri Palayam M Balagurumurthy Chettiar, Sri K N Muthugopal Chettiar, Sri K S Varadarajulu Chettiar, Sri V.S.N. Ramalinga Chettiar, Sri K B Muthuveeranna Chettiar
10 Tamilnad Mercantile Bank Limited 1921 Thoothukudi, Tamil Nadu, India 8.85% p.a. Nadar Mahajana Sangam
11 Yes Bank 2004 Mumbai, Maharashtra 9.85% p.a. Sri Rana Kapoor
12 Bandhan Bank 2001 Kolkata, West Bengal 8.75% – 14.50% p.a. Sri Chandra Shekhar Ghosh
13 CSB Bank Limited 1920 Thrissur, Kerala 8.80% – 9.05% p.a. Syrian Christian Community
14 IDFC Bank 2015 Mumbai, Maharashtra 9.50% – 12.15% p.a. Dr. Rajiv Lall
15 DCB Bank Limited 1930 Maharashtra 10.24% – 10.24% p.a. Aga Khan Fund for Economic Development
16 Nainital Bank 1922 Nainital, Uttaranchal 7.40% – 8.00% p.a. Sri Govind Ballabh Pant
17 RBL Bank 1943 Mumbai, Maharashtra 10.45% – 11.80% p.a. Sri Vishwavir Ahuja
18 Federal Bank 1931 Aluva, Kerala 8.35% – 8.5% p.a. Sri K.P Hormis
19 HDFC Bank 1994 Mumbai, Maharashtra 8.7% – 9.6% p.a. Sri Hasmukhbhai Parekh

I hope the article gives you a better picture of Ancient India and Indian Banking Systems, which is the reason for the article.