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.

Brahman2% per monthWas supposed to earn only enough for 5 days
Kshatriya4% per monthWere involved in wars fighting enemies
Vaishya6% per monthBusiness-class who had to donate on a daily basis
Shudra8% per monthMostly 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:

1Shroffs
2Seths
3Sahukars
4Mahajans
5Chettis (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:

1Allahabad bank1865
2Oudh commercial bank1881
3Punjab National Bank1895
4Central bank of India1891

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 NameFoundedHeadquartersHome Loan Interest RateFounders
1Bank of Baroda1908Vadodara, Gujarat7.25% – 8.25% p.a.Sri Sayajirao Gaekwad III
2Bank of India1906Mumbai, Maharashtra8.00% – 8.30% p.a.Sir Sassoon J. David
3Bank of Maharashtra1935Pune, Maharashtra8.55% – 9.00% p.a.Sri V. G. Kale
4Canara Bank1906Bengaluru, Karnataka8.05% – 10.05% p.a.Sri Ammembal Subba Rao Pai
5Central Bank of India1911Mumbai, Maharashtra8.00% – 8.55% p.a.Sri Sorabji Pochkhanawala
6IDBI Bank Limited1964Mumbai, Maharashtra8.25% – 8.80% p.a.Sri GOI by Act of Parliament
7Indian Bank1907Chennai, Tamil Nadu9.00% p.a. onwardsSri S. Rm. M. Ramaswami Chettiar
8Indian Overseas Bank1937Chennai, Tamil Nadu8.20% – 10.95% p.a.Sri M. Ct. M. Chidambaram Chettyar
9Oriental Bank of Commerce1943Gurgaon, Haryana8.25% – 8.80% p.a.Sri Rai Bahadur Sohan Lal
10Punjab & Sind Bank1908New Delhi, Delhi7.55% – 8.15% p.a.Sri Vir Singh
11Punjab National Bank1894New Delhi, Delhi8.95%- 9.95% p.a.Sri Dyal Singh Majithia‎; ‎Lala Lajpat Rai
12State Bank of India1955Mumbai, Maharashtra7.35% – 7.75% p.a.Sri MaharajaMadho Rao Scindia
13Syndicate Bank1925Manipal, Karnataka8.00% – 8.60% p.a.Sri T. M. A. Pai, Sri Vaman Srinivas Kudva, Sri Upendra Ananth Pai
14UCO Bank1943Kolkata, West Bengal8.05% – 8.60% p.a.Sri Ghanshyam Das Birla
15Union Bank of India1919Mumbai, Maharashtra7.30% – 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

1Axis Bank1993Mumbai, Maharashtra8.40% – 11.75% p.a.Sri Rakesh Makhija
2Dhanlaxmi1927Thrissur, Kerala9.55% – 10.25% p.a.Sri Sajeev Krishnan
3ICICI Bank1994Mumbai, Maharashtra8.65% – 10.35% p.a.Sri Kundapur Vaman Kamath
4IndusInd Bank1994Pune, Maharashtra8% onwardsSri Srichand Parmanand Hinduja
5Jammu and Kashmir Bank1938J & K7.70% – 8.00% p.a.Government of Jammu and Kashmir
6Karnataka Bank1924Mangalore, Karnataka8.55% p.a.Sri B. R. Vysaray Achar, Sri K. S. N. Adiga
7Karur Vysya Bank1916Karur, Tamil Nadu8.20% – 10.05% p.a.Sri M. A. Venkatarama Chettiar, Sri Athi Krishna Chettiar
8Kotak Mahindra Bank2003Mumbai, Maharashtra7.85% – 8.55% p.a.Sri Uday Kotak
9Lakshmi Vilas Bank1926Chennai, Tamil Nadu9.70% 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
10Tamilnad Mercantile Bank Limited1921Thoothukudi, Tamil Nadu, India8.85% p.a.Nadar Mahajana Sangam
11Yes Bank2004Mumbai, Maharashtra9.85% p.a.Sri Rana Kapoor
12Bandhan Bank2001Kolkata, West Bengal8.75% – 14.50% p.a.Sri Chandra Shekhar Ghosh
13CSB Bank Limited1920Thrissur, Kerala8.80% – 9.05% p.a.Syrian Christian Community
14IDFC Bank2015Mumbai, Maharashtra9.50% – 12.15% p.a.Dr. Rajiv Lall
15DCB Bank Limited1930Maharashtra10.24% – 10.24% p.a.Aga Khan Fund for Economic Development
16Nainital Bank1922Nainital, Uttaranchal7.40% – 8.00% p.a.Sri Govind Ballabh Pant
17RBL Bank1943Mumbai, Maharashtra10.45% – 11.80% p.a.Sri Vishwavir Ahuja
18Federal Bank1931Aluva, Kerala8.35% – 8.5% p.a.Sri K.P Hormis
19HDFC Bank1994Mumbai, Maharashtra8.7% – 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.