INTRODUCTION
THE CITY OF BOMBAY HAS A LONG HISTORY AS a centre of banking and trade. Now, Bombay is considered as the largest trading and distributing centre in the country and is the abode of almost all the financial institutions with either their head-offices or branch-offices in Bombay. An attempt is therefore made in the present chapter to depict the development of Bombay from a small island to its present position as one of the largest financial and trading centres.
The present chapter for the sake of convenience is divided into two sections viz., (1) Banking and Finance, and (2) Trade and Commerce.
In the first section are described the various financial institutions that cater to the requirements of the economy. They include such agencies as money-lenders, joint-stock banks, co-operative societies, the Life Insurance Corporation, joint-stock companies, small savings movement, State-aid to industries and other State sponsored financial institutions.
Of these, the money-lenders and the indigenous bankers are the traditional institutions which played an important role in the credit supply mostly to the people of urban areas. The establishment of banks and their development on modern lines is a later phenomenon. The earliest bank in Bombay was established as early as in 1720. The development of financial organisations and institutions in Bombay began during the 19th Century. Until the establishment of the Bank of Bombay in 1840, the banking business in Bombay was carried on by about hundred Hindu shroffs who were the traditional indigenous bankers. But the excessive rates of interest charged by them and the malpractices adopted to exact money from the poor proved detrimental to the economic well-being of the people in the past. In order to check the prevailing malpractices, the then Government of Bombay State passed the Bombay Moneylenders Act of 1946. Another important event that eventually undermined the influence of money-lenders was the gradual rise of the modern joint-stock banks.After the World War II, and especially after Independence, the banks have considerably expanded their scope of activity by way of liberal policy of credit and also by their policy of branch expansion.
Development in the field of banking was accompanied by a still greater development in the field of co-operation. A large network of co-operative societies is spread all over the city and includes industrial and service co-operatives, housing societies, etc.
These financial institutions, in addition to purveying credit to all classes of people in Bombay, also collect the savings of the people in the form of premia and invest them in the interest yielding securities. The insurance and joint-stock companies need in this context a specific mention. The post-war period experienced a remarkable progress in the case of both these categories. Besides, in 1945, the small savings movement was started with the intention of mopping up purchasing power to fight the inflationary forces set in motion by the war, and later it was adopted by the Planning Commission as an important means to finance the development schemes included in the Five-Year Plans.
The role of Government in the field of finance and other fields of economic activities is also discussed in this chapter. Thus, the first section describes in detail the banking and financial institutions in the district in their historical and structural aspects.
In the second section of the chapter are discussed the structure, direction as also the quantum and value of trade and commerce in the district. In fact, the banking set-up in Bombay has significant bearings on the pattern and organisation of trade and commercial activities. The growth of banking and various financial institutions and increasing facilities of transport and communications have contributed immensely to the growth of trade in Bombay. The State Trading Corporation, State Marketing Federation, Export Promotion Councils, and many other agencies also help the trading activities in Bombay. As such the second section describes all types of trading activities such as forward trading, wholesale and retail trading, regulated and co-operative marketing, as also inland and foreign trade undertaken in Greater Bombay. Besides, it also includes narration of trade-routes which are responsible for growth of trading activities.
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SECTION I -BANKING AND FINANCE
GOVERNMENT MINT
After the transfer of Bombay Island to the East India Company, several schemes including a plan for establishment of English currency were considered. In 1670-71 the Court of Directors recommended establishment of a mint at Bombay for coining gold, silver and copper coins. In 1675, President Aungier also put forward his suggestion for the establishment of a mint. On 15th October 1676, the King by Letters of Patent empowered the Company to establish a mint at Bombay and permitted them to coin moneys of gold, silver, copper, tin, lead or any metal. Accordingly, the grant of privilege was intimated by the Company in 1677 and a Rupee was struck at Bombay bearing the Royal Arms and the legend, " By authority of Charles the Second ".
During the first half of the 18th century a considerable quantity of silver rupees of varying coinage and alloy and of a value inferior to the standard of the Bombay and Surat rupees used to be brought to Bombay from outside. Persons were appointed at the Land Pay Office to exchange rupees for pice at the rate of 80 pice for a rupee. Due to scarcity of copper, the local authorities coined tutenag pice to the value of Rs. 2,000. This coin was however, discontinued in 1773. For the want of small currency, half and quarter pice to the value of Rs. 10,000 were coined. Great scarcity of silver which prevailed on the Bombay Island in the middle of eighteenth century led to the establishment of gold currency in 1765. The resolution passed in 1767 equalised the standard of Surat rupees with that of Bombay rupee. In 1774, the rupees coined at Broach were again admitted as current in Bombay.
In 1775 owing to the want of silver currency gold was coined to the amount of Rs. 60,000 in pieces of the value of one silver rupee each, to be in fineness exactly equal to the gold rupees then in circulation and of 1/15th part of the weight of a gold rupee. However, in 1778 the issue of gold coin was stopped.
The old Bombay rupee was identical with that coined at Surat under the Mughal Government. It weighed 178.314 grains and contained 1.24 per cent of alloy. Asthe Nawab of Surat did not observe the agreement with the Bombay Government, all the Bombay rupees were carried to Surat to be re-coined, and the Bombay mint ceased to coin silver for more than 20 years. In 1800, however Government ordered the Surat rupee to be struck in Bombay and from that date the rupee was maintained at an equal value in both the mints. It weighed 179 grains and contained 7.97 per cent, of alloy.
According to the order of 1800, in the Bombay coins 15 grains of silver represented one of gold. A scarcity of rupees in 1801 was responsible for the introduction of new gold coin as a circulating medium. In 1815, the Government ordered abolition of Surat Mint and decided that whole coinage of the Presidency should be conducted at the Bombay Mint. In 1827, the copper pie was introduced which weighed 33 1/3 grains and was equal to one-twelfth of an anna.
The coinage of India was made uniform in 1835. The East India Company's rupee was ordered to take the place of the Sicca rupee. However there was a difference between Sicca rupee and the Company's rupee as the former contained 8 per cent more silver than the latter. In 1841, a two anna silver piece was introduced and a proclamation was issued regulating the gold coinage. According to this proclamation the gold coins were to bear on the obverse the head of Queen Victoria and on the reverse-a lion and a palm tree with the designation " East India Company ". In 1844, a change was made in the device on copper coinage issued from Bombay mint.
In 1857, the sub-divisions used in the public and other accounts were rupees, annas and pies. One gold mohur was equal to 15 silver rupees; one rupee equal to 16 copper annas; one anna equal to 4 pice; and 1 pice equal to 3 pies. However, many mercantile houses and traders retained the old sub-divisions of rupees, quarters and reas. Although the gold mohur and copper anna formed sub-divisions in the scheme of the British Indian currency, those coins were not current.
Upto the year 1893, the operations of the Indian Mints were regulated by the Coinage Acts, viz., Act XVII of 1835, Act XIII of 1862, and Act XXIII of 1870. These Acts provided for the free coinage of gold and silver for the public and for the coinage of copper for Government regiments. There was no great demand for a gold coinage. But public took full advantage of the free coinage of silver. Under the terms of the Coinage Acts in force upto 1893, any person tendering silver to the mint to the amount of 1,000 tolas and over was entitled to have it coined into rupees on payment of a seignorage charge of Rs. 21 for every 1,000 rupees of outturn produced by his tender.
In June 1893 the Indian Mints were closed to the free coinage of gold and silver and since that date no rupees were coined except on Government account.
In 1895 an agreement was effected between the Government of India and two of the local Exchange Banks for the coinage of a British dollar at the Bombay Mint for circulation in the Straits Settlements and Hongkong. The agreement ceased in 1903 when the Government of the former colony issued a new coin called The Straits Settlements Dollar for circulation in their territories. The coinage of the rupee with the effigy of King Edward VII was commenced in January 1903.
Experiments were undertaken in 1905-6 (Bombay Mint, 150th Anniversary Celebration, 1st May 1982, published by Bombay " Mint.)for the manufacture of Cupro-nickel one anna piece with a view to obtaining a coin distinctive in shape from any existing coins current in British India. The minting of this coin began in 1906-07 and the first issues to the public were made from 1st August 1907.
After George V came to the throne in 1910, coins were issued in bis name. There was a tiny elephant on the design of the mail of his effigy on one rupee coin. The Government had to stop minting of these coins as there was wide-spread resentment among the members of one community in India, as this elephant looked like a pig.
Indian coins were issued in the name of George VI when he was crowned in May 1937.
The coins of quaternary silver alloy were introduced from 1940 in place of standard silver. Due to inadequate supplies of silver and the high prices of this metal prevailing in India, it was decided in 1946-47 to discontinue minting rupees, half-rupees and quarter-rupees, in quaternary silver alloy coins as they contained silver, and instead coins in pure nickel were introduced. These coins came into circulation in 1947.
After January 26, 1950 the effigy of the English monarch on the obverse was replaced by the Ashoka Pillar. From 1950-57 different figures appeared on the reverse of the coins. On one rupee, half-rupee and quarter-rupee coins there were ears of corn ; on two annas, one anna and half an anna coins there was a bull; and on one paisa there was a flying horse.
India adopted the decimal system of coinage from April 1, 1957. The lowest denomination in decimal coinage system as adopted in India is one paisa, and one hundred paise makes one rupee. Initially this paisa was called Naya Paisa to distinguish it from the old paisa. The prefix " Naya " was dropped from 1963. All the coins of decimal series bear the Ashoka Pillar on the obverse side with letters ' Bharat' in Devanagri and ' India' in English on its two sides. On the reverse side these coins bear the denomination in numericals in English, and in letters in Hindi, and also the year of the issue in English numericals. The only exception was that of aluminium-bronze 20 paise coin issued from 1968 to 1971 as this coin contained a figure of a lotus flower on its reverse. It had been decided to issue coins bearing, on the reverse, our national bird, national animal, national fruit, national flower, etc. Accordingly, the first issue was made of national flower. But later, this proposal was dropped and therefore, the 20 paise coin with the lotus on the reverse remained an exception.
With the sudden increase in the prices of copper and nickel, certain changes in the alloy composition of the decimal series were introduced in 1962. They were as under (Indian Coinage Since Independence, issued on the occasion of the 25th Anniversary of Independence, Govt, of India.):—
(1) The bronze one paisa was replaced by nickel brass (copper 79 per cent, zinc 20 per cent, nickel 1 per cent) in 1962. The weight and shape of the coin remained unaltered. In October 1965, the aluminium-magnesium alloy (Mg-3.5 to 4 per cent, Al. remainder) was adopted for the paisa, and the shape was changed from round to square with rounded corners, this new coin weighed 0.75 grams. (2) A new coin in aluminium-magnesium alloy of the denomination of three paise, weighing 1.25 grams and hexagonal in shape was introduced in July 1964. (3) Two paise coin in aluminium-magnesium alloy, weighing 1.0 gram and 8 scalloped was introduced in July 1965. Five paise coin in aluminium-magnesium alloy, weighing 1.5 grams and square with rounded corners was introduced in January 1967. (4) A new coin in the denomination of twenty paise was introduced in April 1968, discontinuing minting of twenty-five paise coin in pure nickel with a view to conserve nickel which was in short supply. The alloy chosen for this new twenty paise coin was aluminium-bronze (copper 92 per cent, nickel 2 per cent and aluminium 6 per cent). The coin was circular in shape and weighed 4.5 grams. (5) The same alloy was used for ten paise coin from the same date with a view to conserve nickel. The aluminium-bronze ten paise coin weighed 4.25 grams, instead of 5.0 grams of the earlier cupro-nickel piece of the same denomination, the shape and design remaining the same in all respects. The aluminium-bronze alloy proved very popular because of its golden yellow colour but this also led to the erroneous belief that this coin contained ' gold ' resulting in large-scale hoarding and diversion of these coins for the making of trinkets, etc. The minting of ten paise and twenty paise coins in aluminium-bronze alloy was therefore, stopped from October 1971. (6) In lieu of the Al. Bronze ten paise coin a new aluminium-magnesium coin was introduced in October 1971 in an entirely new shape and size. It weighs 2.3 grams, has 12 scallops and measures 26 mm. across scallops. (7) In place of aluminium-bronze twenty paise coin, the minting of twenty-five paise coin was resumed from January 1972, but instead of pure nickel, cupro-nickel alloy (75 per cent copper and 25 per cent nickel) has been adopted. The shape and weight as also the general appearance remained the same as of the pure nickel piece except for a small change in the design on the reverse. The cupro-nickel twenty-five paise coin weighs 2.5 grams and is circular in shape (19 mm dia). (8) Cupro-nickel alloy in place of pure nickel has also been adopted for the fifty paise coin from January 1972 with a view to reducing the nickel content. But the shape, weight and general appearance remained unchanged, except for security edging which has been adopted (instead of milled edge of the nickel piece) to deter counterfeiting and for a small change in the design of the reverse. (9) A small change in the design of the reverse of 3 and 5 paise coins was made in March 1972 so as to bring; uniformity inthe design of the reverse of all the denominations.
Apart from the various series of new coins, the mint issues commemorative coins almost every year. Commemorative coin is a coin issued to mark, honour, or observe an event, place or person, or to preserve its memory. The themes on commemorative coins are selected every year by the Government of India on National and International events.
The list of commemorative coins issued by Bombay Mint since Independence is given below:—
| Year |
Theme |
Denominations |
| 1964 |
Jawaharlal Nehru |
Re.1 and 50.P |
| 1969 |
Mahatma Gandhi |
Rs.10,Re.1.50.P. and 20 P. |
| 1970 |
Food for all |
Rs.10 and 20P. |
| 1971 |
Food for all |
Rs.10 and 20 P. |
| 1972 |
Indian Independance 25 th Anniversary |
Rs.10 abd 50P. |
| 1973 |
Grow More Food |
Rs.20,Rs.10 and 50 P. |
| 1974 |
Planned families, Food for all |
Rs.50, Rs.10 and 10 P |
| 1975 |
Equality, Developement, Peace |
Rs.50,Rs.10 and 10P |
| 1976 |
Food and work for all |
Rs.50,Rs.10 and 10 P. |
| 1977 |
Save for Development |
Rs.50,Rs.10,10P and 5 P |
| 1978 |
Food and Shelter for all |
Rs.50,Rs.10,10P and 5 P |
| 1979 |
Happy Child Nation's Pride |
Rs.50,Rs.10,10P and 5 P |
| 1980 |
Rural Women's Advancement |
Rs.100,Rs.10, 25P. and 10 P |
| 1981 |
World Food Day |
Rs.100,Rs.10,25 P. and 10 P |
Besides, proof coins or uncirculated coins are minted at Bombay. Proof coins (or Collector's coins as they are popularly called) are exceedingly high quality coins. They are struck individually with specially prepared blanks and highly polished dies. A 'Proof set' of Indian coins consists of one coin of each denomination authorised for circulation or commemorative purposes. Orders for the proof coins are booked every year by the Master of the Mint, Bombay upto a specified date notified every year in the leading newspapers.
The current capacity (Nineteenth and Twentieth Century Coins of India, D. C. Chakravarty, 1979.)of the India Government Mint, Bombay, is 3.0 Million pieces a day, on double shift basis. It is the only licensed gold refinery in the country at present. Besides, it manufactures and supplies the reference, secondary and working standards of metric weights, capacity and linear measures for all the States in India. There is also a medal section which undertakes production of medals for civilian and military awards. Orders for supply of Proof' and ' uncirculated ' coins are now executed by Bombay Mint.
In the year 1970 the Bombay Mint coined coins for Greece. In the same year the mint produced 86 million coin blanks for Thailand. This mint supplied coins between the period 1891 and 1947, to many foreign countries, such as Sri Lanka, East Africa, Australia, Egypt, Bhutan, Iraq, Saudi Arabia, Malaya and Muscat.
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MONEY-LENDERS
The institution of money-lenders is a traditional organisation and sometimes an hereditary occupation which is generally undertaken by Marwadis, Pathans, landlords, traders, etc. Prior to the introduction of banking system on modern lines by the British rulers in the 19th Century, the money-lenders and the indigenous bankers used to perform all the banking activities. The former used to advance loans mostly for unproductive purposes at a very high rate of interest and did not accept deposits while the latter advanced loans for commercial and industrial purposes and accepted deposits. The fast growth of commercialisation and industrialisation leading to higher standard of living has resulted in the increasing demand for financial assistance and has finally led to the flourishing of institutions engaged in money transactions including the institution of money-lenders. The money-lenders generally work on individual basis with their own financial resources.
In Bombay, the establishment of cotton mills attracted large number of uneducated workers from various parts of the country. It became very difficult for them to adjust with the new conditions of life in the city as also to maintain their families at their native places. They ultimately became regular victims of money-lenders. Before the growth of banking and such other credit facilities, money-lender was the only source for the reasonable rate of interest, the borrowers were continually exploited by the money-lenders. Chronic indebtedness became more or less their way of life. In due course, credit facilities at reasonable rates were made available. The money-lenders, however, continued to enjoy almost the same predominant position in the economy as in the past. In these circumstances, it was found necessary to regulate the business of money-lenders by a legislative act. It was with this purpose in view that the Bombay Money-Lenders Act was passed in 1946.
Generally, theie are two types of money-lenders, professional and casual. The latter advance loans to their friends and try to cover the risk by charging a high rate of interest. The dealings of a casual moneylender are of a casual character and in some cases they even fail to get the repayment of loan. The other type is of professional money-lenders, who undertake money-lending as an occupation or means of their livelihood. There are still others who combine this occupation with some other profession or trading activity. There are Marwadis who are full-time money-lenders and who also supply consumer goods to the borrowers. The Marawadi money-lenders also adopt various techniques for keeping their hold on customers. They generally advance loans on pledge of physical security such as ornaments, moveable or immoveable property etc. The rate of interest varies according to nature of security offered and is calculated on monthly basis. Generally the customers of Marwadis comprise low income group or even middle class people such as mill workers, government servants, petty traders, etc.
Rapid industrialisation and growth of trade and commerce in Bombay provided a good scope to money-lenders. As a money-lender used to offer loans on security immediately without any hesitation, many traders came forward to borrow money from him to meet their business requirements. All these factors have led to increase in the number of moneylenders. During 1963-64, there were 1202 money-lenders in Bombay; while the number increased to 2053 in 1970-71. As compared to Bombay Division, Bombay claimed the highest number of money-lenders; as out of the total of 3228 money-lenders during 1970-71, there were as many as 2053 money-lenders in Bombay. The number of money-lenders in Bombay rose to 2600 during 1973-74 against 3633 in Bombay Division. However, in 1980-81 the number of money-lenders in Greater Bombay showed a decrease as the same stood at 2117.
The transactions of money-lenders are now governed by the Bombay Money-Lenders Act, 1946 which was amended by the Bombay Money-Lenders (Unification and Amendment) Act, 1959. The amount of loans advanced by money-lenders during 1950-51 and 1960-61 in Bombay is shown in the following statement :—
(Figures in Rs.)
Particulars |
1950-51 |
1960-61 |
Total loans advanced to traders and non-traders— |
|
|
| (i) Exempted under Section 22 of the Act |
144,982,527 |
122,288,806 |
| (ii) Not exempted under Section 22 of the Act |
14,372,104 |
19,248,066 |
| |
|
|
| Loans advanced to traders- |
|
|
| (i)Exempted under Section 22 of the Act |
143,496,497 |
121,531,111 |
| (ii) Not exempted under Section 22 of the Act |
3,522,834 |
13,158,710 |
| |
|
|
| Loans advanced to non-traders- |
|
|
| (i) Exempted under Section 22 of the Act |
1,486,030 |
757,695 |
| (ii) Not exempted under Section 22 of the Act |
10,849,270 |
6,089,356 |
A comparative position of money-lending business in Greater Bombay and the State during 1970-71, 1973-74 and 1976-77 was as follows:—
(a) Money-lending transactions exempted under Section 22 of the Bombay Money-Lenders Act—
|
Loans to traders |
Loans to non-traders |
Tota Loans |
Year |
(Rs.) |
(Rs.) |
(Rs.) |
|
|
|
|
Greater Bombay— |
|
|
|
1970-71 |
306,733,000 |
31,235,000 |
337,968,000 |
1973-74 |
264,938,113 |
49,662,291 |
314,600,404 |
1976-77 |
209,417,000 |
37,292,000 |
246,709,000 |
Maharashtra— |
|
|
|
1970-71 |
307,952,000 |
41,466,000 |
349,418,000 |
1973-74 |
266,371,513 |
65,506,068 |
331,877,581 |
1976-77 |
209,417,000 |
41,251,000 |
250,668,000 |
(b) Money lending transactions not exempted under Section 22 of the Bombay Money-Lenders Act—
|
Loans to traders |
Loans to non-traders |
Tota Loans |
Year |
(Rs.) |
(Rs.) |
(Rs.) |
|
|
|
|
Greater Bombay— |
|
|
|
1970-71 |
63,180,000 |
62,578,000 |
125,758,000 |
1973-74 |
105,512,565 |
84,403,512 |
189,916,077 |
1976-77 |
61,144,000 |
30,999,000 |
92,143,000 |
Maharashtra— |
|
|
|
1970-71 |
117,068,000 |
239,721,000 |
356,789,000 |
1973-74 |
163,804,450 |
336,437,819 |
500,242,269 |
1976-77 |
91,105,000 |
153,883,000 |
244,988,000 |
The licensed money-lenders in Greater Bombay who were not exempted under Section 22 of the Bombay Money-Lenders Act, 1946 advanced loans to the tune of Rs. 6,09,62,000 in 1980-81 out of which Rs. 4,05,47,000 were advanced to traders and Rs 2,04,15,000 to non-traders. Similarly the money-lenders who were exempted under Section 22 of the Act advanced an amount of Rs. 8,47,35,000 as loans during 1980-81 to non-traders. As compared to advances during 1970-71, the loans advanced in 1980-81 showed a decline.
The maximum rates of interest upto 12 and 15 per cent per annum on secured and unsecured loans, respectively were in force upto July 1971. However, these rates were increased to 14 and 17 per cent per annum, respectively upto September 1974. Afterwards these rates were allowed to increase upto 18 and 21 per cent on secured and unsecured loans, respectively.
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CO-OPERATIVE MOVEMENT
Since the passing of India Act X of 1904, co-operative credit societies have been established in Bombay City, and the first co-operative credit society, known as the Bombay Pioneer Urban Co-operative Credit Society was registered in 1905. In 1906, the Bombay Urban and the Shamrao Vithal Co-operative Credit Societies were formed.
Subsequently a number of co-operative societies of various types were registered.
The total number of different types of co-operative societies during 1960-61 in Bombay was 1670 which increased to 2,965 in 1964-65 and further to 5,207 in 1970-71. Out of 5,207 co-operative societies, housing, urban credit and consumers' stores together accounted for 4,879, covering nearly 98 per cent of the total. The co-operative movement in Bombay is necessarily an urban movement. During 1975-76, the total number of co-operative societies of all types stood at 7645. The details of all types of co-operative societies in Greater Bombay are given in the following pages.
Primary Agricultural Credit Societies : At the end of June 1976, there were nine primary agricultural credit societies with a membership of 2881. The paid up capital of these societies amounted to Rs 12.94 crores, of which Government's share amounted to 30 lakh. The amount of deposits were to the tune of Rs 4.64 crores, where as the total liabilities were to the tune of Rs. 49.32 crores. The working capital of these societies was to the tune of Rs. 27.03 crores, the total investments Rs. 6.12 crores and total assets Rs 55.87 crores.
Out of nine societies, one society owned a godown with a storage capacity of 250 tonnes, three societies had one hired godown each with the total storage capacity of 850 tonnes. Only two societies dealt in advancing loans which amounted to Rs. 90,346 during the year 1975-76.
Urban Credit Societies: Joint-stock banks in the beginning used to cater to the needs of big entrepreneurs, industrialists and businessmen concentrated in big cities. These banks were not interested in developing business of common man. Under these circumstances, numerous petty traders and artisans, small salaried classes had to depend upon the moneylenders. Even now most of the families in industrialised cities like Bombay are found in debt. With the recent trend of urbanisation, the need for urban credit societies is assuming new significance.
The urban credit societies reach a common man in the distant cornets of the city where a joint-stock bank may not reach. In 1948-49, Bombay City had 269 urban credit societies with a total membership of 3,06,616; while the number of urban credit societies in suburban areas was 24 with a membeiship of 6,538. The percentages of population covered by these societies in the city and suburban areas were 20.5 and 8.3, respectively. Thus compared to the figures in Bombay State, the highest number of urban credit societies and the highest percentage of coverage of urban population were found in Bombay city. The co-operative movement received impetus especially after 1960 and Bombay was no exception to it. During the decade 1960-61 to 1970-71 the number of urban credit institutions had been doubled in the city. During 1970-71, the number of credit societies was put at 905 with 10,41,000 members.
Urban Banks ('For details refer to ' Co-operative Banking ' under the section of Banking and Finance.): Prior to the lecommendations of Mehta-Bhansali Joint Re-organisation Report on Co-operative Movement in 1939, every urban credit society whose working capital exceeded Rs. 50,000 was called a major urban bank. According to these recommendations the former Bombay Government laid down that only those urban credit societies which actually undertook the business of banking and which had a paid-up share capital of not less than Rs. 2,000 could be called full-fledged urban bank. The first co-operative bank viz. the Shamrao Vithal Co-operative Bank was registered under the co-operative fold in 1906. It was mainly established to help the people of Saraswat community by giving them credit facilities. Since its inception, the Bank has showed an all-iound progress in its business.
During 1970-71, the total number of co-operative banks in Greater Bombay district was 69 with a total membership of 4,76,000. In 1975-76, the number of banks rose to 83 with a total membership of 4,73,636. However, the number of primary urban co-operative banks decreased to 75 by the end of December 1977. Of these, four were under liquidation and 11 were salary earners' co-operative banks.
Salary Earners' Societies : These are also known as Employees' Credit Societies and are mainly urban credit societies. The repayment of loans from the salaries of the members enables the societies to avoid the problem of overdues which is a common problem faced by all types of credit societies. During 1975-76, the number of such societies was 875 and their total membership was 12,18,635. Other particulars of these societies are given below:—
Particulars |
Number |
Total employees' credit societies |
875 |
Members |
12,18,635 |
Paid-up capital (Rs. in '000) |
25,95,73 |
Working capital (Rs. in '000) |
50,10,20 |
Distribution of consumers' goods— |
|
(i) Societies engaged |
40 |
(ii) Value of goods purchased (Rs. in '000) |
3,001 |
Goods sold—(Rs. in '000) : |
|
(i) Foodgrains (Rs. in'000) |
1,492 |
(ii) Others (Rs. in '000) |
1,446 |
Profit— |
|
(i) Societies |
837 |
(ii) Amount (Rs. in '000) |
27,104 |
Milk Supply Societies : Milk supply business is growing enormously in the vast area of Greater Bombay. The three dairies established by the State Government find it very difficult to cope up with the demand for milk. This very fact led to the growing of business of private milk suppliers. However, to overcome the competition and other problems of business such as difficulties in distribution of milk, transport, etc., some of them came together and formed co-operative societies. During 1964-65, there were as many as 27 dairy societies including two dairy federations in the Greater Bombay district. The total number of members of these societies was 1,184. The number of societies however, decreased by three during 1970-71, and their membership by 501. During 1975-76, the number of milk societies showed an increase and the same stood at 29, while the number of dormant societies was 4. The particulars of these societies are given below:—
Particulars |
Number |
| Number of societies |
29 |
| Number of members - |
|
| (i) Societies |
15 |
| (ii) individuals |
806 |
| Paid-up capital (Rs. in '000) |
20,75 |
| Working Capital (Rs. in '000) |
96,97 |
| Sales (Rs. in'000) |
1,45,39 |
| Profit - |
|
| (i) Number of societies |
17 |
| (ii) Amount (Rs. in '000) |
88 |
| Number of persons employed |
50 |
Consumers’ Stores: The development of consumers' co-operation as an economic system is well-associated with the name of Rochdale Pioneers. The consumers' co-operative movement received a great fillip during the First World War as a result of the abnormal conditions created by the war, but soon after the cessation of war, most of the stores had to be wound up. But since the Second World War, there had been a mushroom growth of these consumers' co-operatives, due to the noteworthy drive to instigate the consumers to come together fot their own interest in getting proper distribution of consumers' goods at fair prices. The movement gained ground and leceived momentum after Independence and more so with the progress of Five Year Plans. Now, most of the consumers' stoies undertake the sale of number of articles including the controlled commodities.
From 309 primary consumers' stores in Greater Bombay in 1965-66, the number rose to 389 in 1970-71. In 1975-76 the number of consumers' stores increased to 417, the details of which are given below:—
Particulars |
Number |
Number of primary consumers' stores |
417 |
No. of members (in '000) |
17,52 |
Share capital (Rs. in '000) |
50.72 |
Working capital (Rs. in '000) |
2,04.84 |
Total sales (Rs. in '000) |
30,01.79 |
Number of societies in profit |
290 |
Amount of profit (Rs. in '000) |
12.35 |
Besides, the primary consumers' stores, there are wholesale consumers' stores in Greater Bombay engaged in the wholesale business of sale and purchase of consumers' goods. From 3 wholesale consumers' stores in Greater Bombay during 1964-65, the number increased to 8 in 1970-71 with a total membership of 47,306.
These eight stores had 55 branches scattered all over the district. During 1975-76, there was further increase in the number which stood at 15 with 99 branches with a total membership of 70,817. The details of these wholesale consumers' stores are given below:—
| Particulars |
Number |
| Total number of wholesale stores |
15 |
| Total number of branches |
99 |
| Membership - |
70,817 |
| (i) Individuals 70,381 |
|
| (ii) Consumers' stores 420 |
|
| (iii) Others 16 |
|
| Share Capital (Rs. in '000) |
91.48 |
| Working capital (Rs.in'000) |
4,61.79 |
| Sales (Rs. in '000) |
32,13.61 |
| Purchases (Rs. in '000) |
30,29.14 |
| Profit - |
|
| (i) Number of stores |
9 |
| (ii) Amount (Rs. in '000) |
11.01 |
| Loss - |
|
| (i) Number of stores in loss |
5 |
| (ii) Amount (Rs. in '000) |
21.02 |
| Number of stores without profit or loss |
1 |
Labour Contract Societies : In pursuance of its policy of progressive elimination of middlemen in the sphere of business, Government has decided to give preferential treatment to these societies in respect of entrusting work to them. These societies also get loans from the Government.
During 1960-61, there were only 27 labour contract societies with a total membership of 3,775. Their number, however, increased to 43 with 6,623 members in 1964-65 and again to 67 during 1970-71 with 9,147 members. In 1975-76, there were as many as 103 labour contract societies in Greater Bombay, the details of which are given below:—
Particulars |
Number |
Number of labour contract societies |
103 |
Number of members— |
|
(i) Labourers |
13,187 |
(ii) Others |
178 |
Paid-up capital (Rs. in '000) |
11,73 |
Working capital (Rs. in '000) |
49,82 |
Value of contracts executed (Rs. in '000) |
1,65,93 |
Number of labourers employed |
127 |
Income earned (Rs. in '000) |
1,31,60 |
Profit— |
|
(i) Number of societies |
48 |
(ii) Amount (Rs. in '000) |
2,44 |
Transport Societies : Another important sector of the co-operative movement is the organisation of transport societies. These societies were first organised at the end of Second World War with a view to benefiting ex-service personnel. The Government sanctioned financial assistance to these societies. The successful working of these societies of ex-servicemen prompted the organisation of transport societies by other persons. These societies however, received a set-back due to nationalisation of passenger transport.
During 1970-71, the number of transport societies in Greater Bombay was 12 with 1,376 members. The number increased to 13 in 1975-76, including one society of ex-servicemen. However, out of 13 societies, 8 were dormant during the same period. The details of these societies are given below:—
Particulars |
Number |
| Number of societies |
13 |
| Number of members |
2,097 |
| Paid-up capital (Rs in '000) |
4,42 |
| Working capital (Rs in '000) |
24,05 |
| Profit - |
|
| (i) Number of societies |
5 |
| (ii) AMount (Rs. in '000) |
98 |
Fishermen's Societies: A fishermen's society helps the fishermen to avail of the facilities of credit and other requisites such as nets, yarn, launches, etc. Besides, these societies help the members in transportation of fish to the market places by plying launches and trucks with the aid of Government loan and subsidy. The members of the society can get a better price for their fish by selling the same directly in the market.
There is a great scope for the fishing industry to flourish because of the constant and heavy demand for fish in Bombay. The fishermen have now understood that if their business is organised on co-operative basis, it brings them more profit than the individually organised business. A fishermen's society also protects its members from the exploitation by traders and middlemen and thereby helps in improving the economic conditions of the fishermen.
During 1964-65, there were 8 societies of fishermen working in Greater Bombay, besides one apex body with the total membership of 1,757. In the following years, there seemed to be a great increase in the number of societies which rose to 13 during 1970-71 with a total membership of 3,580.
Weavers' Societies : The weavers' societies have not much scope to develop their business in Greater Bombay as most of the handloom cloth arrives in Bombay market from areas and regions outside Greater Bombay. Besides, the taste of the people for this cloth has also undergone considerable change during the last two decades due to heavy competition from mill-made cloth. All these factors together are responsible for creating hindrance in the smooth working of these societies in Bombay. However, there were 16 weavers' societies in 1960-61 which increased to 18 during 1965-66, but reduced to 17 during 1970-71. The total membership of these 17 societies during 1970-71 stood at 2,045.
Housing Societies : The problem of accommodation in Greater Bombay was felt severely after the partition of the country and the consequential influx of population from Pakistan. The Government therefore, came forward to assist in organising co-operative housing societies by giving land and financial aid. At present, different housing schemes such as subsidised industrial housing societies, low-income group housing societies, middle-income group housing societies, slum-clearance schemes etc., are implemented by various authorities.
The Saraswat Co-operative Housing Society was the first co-operative housing society formed in 1915.
The co-operative housing societies are of three types: tenant ownership housing societies, co-partnership tenant societies and the mixed typed which is the combination of the above two types.
The co-operative housing soceities of individuals other than backward class people and industrial workers are financed by the Maharashtra Co-operative Housing Finance Society established in 1958. This society gets finance mainly from the Life Insurance Corporation of India on the guarantee of the State Government. As the number of co-operative housing societies in Greater Bombay went on increasing, it was felt necessary as compared to the number in other cities to have a federal body of the housing societies. In view of this, the Bombay Co-operative Housing Federation Ltd., was registered in 1948. It is carrying on various activities to serve the interests of its member societies in particular, and help the movement of co-operative housing in Greater Bombay in general.
With a view to solve the huge housing problem in Greater Bombay, co-operative housing societies are playing a vital role. During 1964-65, there were as many as 1,635 housing societies with 6,432 members. Out of these societies, the number of societies of backward class people was 55. All these societies constructed 15,058 houses. The number of societies during 1971-72 rose to 4,053 with a total membership of 1,31,161. Besides, there were 88 housing societies of backward classes, nomadic tribes, vimukta jatis and other backward classes. These 4,053 societies constructed 47,953 houses during the same period. The share capital of these societies amounted to about Rs. 9.33 crores; while loans borrowed were to the tune of Rs. 51.32 crores. Out of the 88 housing societies of backward classes, nomadic tribes and vimukta jatis in 1971-72, the number of housing societies of scheduled castes (flood-affected) was 73 which constructed 600 houses during the same year. The share capital of these societies was to the tune of Rs. 28.51 lakhs, while the amount borrowed stood at Rs. 57.65 lakhs. In 1975-76, the number of housing societies rose to 5,564, the details of which are given below :—
Particulars |
Number |
(1) Number of societies |
5,564 |
(2) Number of members |
17,07,306 |
(3) Paid-up capital (Rs. in '000) |
1,10,026 |
(4) Reserve and other funds (Rs. in '000) |
30,899 |
(5) Borrowings (Rs. in '000) |
8,52,018 |
(6) Total liabilities (Rs. in '000) |
16,95,140 |
(7) Working capital (Rs. in '000) |
9,92,943 |
(8) Fixed assets (Rs. in '000) |
1,69,566 |
(9) Houses constructed by societies during the year |
355 |
(10) Value of houses constructed (Rs. in '000) |
9,038 |
(11) Number of societies without profit or loss |
605 |
(12) Number of societies in profit |
3,294 |
(13) Profit (Rs. in'000) |
2,145 |
Other Industrial Co-operatives : Cottage industries and small scale industrial units assume a great significance in our economy as these units try to solve the severe problem of unemployment. In Bombay as elsewhere, the Government have not only offered financial assistance to these units but have given some concessions as also taken some measures towards promoting the sale of their products.
During 1960-61, there were as many as 82 industrial co-operatives in Greater Bombay, which however, increased to 85 in 1970-71. During 1975-76, the number of the societies stood at 79, of which 26 were dormant. These 79 societies included oil crushing, pottery, flaying and tanning, handicraft, general engineering, chemical engineering, leather goods, other village industries and miscellaneous industries. The details of these industrial societies are given below—
Particulars |
Number |
Number of societies |
79 |
| Number of dormant societies |
26 |
Membership— |
|
(i) Societies, individuals and others |
5,637 |
| (ii) Of dormant societies |
1,788 |
| Total liabilities (Rs. in '000) |
12,454 |
| Paid-up capital (Rs. in '000)— |
|
(i) Working capital |
13,409 |
(ii) Total |
2,603 |
| (iii) Government contribution |
851 |
| Statutory reserve fund (Rs. in '000) |
1,004 |
| Other funds (Rs. in '000) |
1,692 |
| Deposits (Rs. in '000) |
1,233 |
| Total borrowings (Rs. in '000) |
1,925 |
| Other liabilities (Rs. in '000) |
3,996 |
| Total assets (Rs. in '000) |
13,409 |
| Closing stocks (Rs. in '000)— |
|
(i) Raw material |
2,110 |
| (ii) Finished goods |
143 |
| Fixed assets (Rs. in '000)— |
|
(i) Plant and equipment |
2,704 |
(ii) Land and buildings |
700 |
| Profit— |
|
(i) Number of societies |
44 |
| (ii) Amount (Rs. in '000) |
485 |
| Loss— |
|
(i) Number of societies |
26 |
| (ii) Amount (Rs. in '000) |
169 |
| Number of societies without profit or loss |
9 |
Industrial Estates : Bombay being a big industrial city, there is always a cut throat competition among the entrepreneurs. In the severe competition from large industries, a small-scale unit cannot stand on its own footing for the requirements of raw material, a plot of land, shed, etc. Such small units come together and start working on co-operative basis. During 1964-65, there were ten industrial estates working in Bombay. The year 1975-76 recorded a slow growth in the number of such industrial estates, as the same stood at 18 during 1975-76 against 15 in 1970-71.
The financial and other aspects of these industrial estates are given below:—
Particulars |
As on 30th June 1976 |
Number of industrial estates |
18 |
Membership— |
|
(/) Individuals |
873 |
(ii) Societies |
3 |
Working capital (Rs. in '000) |
26,687 |
Paid-up capital (Rs. in '000) |
3,341 |
(i) Government (Rs. in '000) |
25 |
(ii) Societies (Rs. in '000) |
19 |
(iii) Individuals and others (Rs. in '000) |
3,297 |
Statutory reserve fund (Rs. in '000) |
329 |
Other funds (Rs. in '000) |
2,398 |
Deposits (Rs. in '000) |
6,047 |
Borrowings (Rs. in '000) |
4,132 |
All other liabilities (Rs. in '000) |
14,678 |
Total assets (Rs. in '000) |
26,687 |
Investment (Rs. in '000) |
961 |
Fixed assets (Rs. in '000) |
19,295 |
Loans outstanding (Rs. in '000) |
3,842 |
All other assets (Rs. in '000) |
2,589 |
Difference between assets and liabilities (Rs. in '000) |
(-)106 |
Employment provided by industrial estates |
132 |
Employment provided by members |
3,294 |
Greater Bombay Co-operative Board : Education and training in co-operation and propaganda for the spread of co-operative movement are undertaken by the District Co-operative Board under the guidance of Maharashtra State Co-operative Union Ltd. A similar district level co-operative institution known as the Greater Bombay Co-operative Board Ltd., was established in 1949. The area under its jurisdiction extends over the city and suburbs of Bombay. The membership of the board is of two types viz., ordinary membership consisting of all cooperative societies in Greater Bombay; and the associate membership consisting of individuals and representatives of the Maharashtra State Co-operative Union, Central Financing Agency, and the Co-operative Department of the State Government. On the 30th June 1976, there were 824 co-operative societies and 341 individuals as members of the Board.
The Board during 1975-76 conducted 27 Panch Committee Education Classes, two camps of the employees of the co-operative societies including one camp of women employees in the co-operative field, 8 education classes for employees of industrial societies. Besides, the board conducted two acquaintance meetings so as to keep acquaintance with the executives of different co-operative societies, and 14 training classes for women's co-operative societies.
The Board since 1960 publishes one Marathi fortnightly viz., Sahakari Jeevan. It has maintained a library equipped with a good collection of books on co-operation. It has also published some booklets giving yearly statistics of co-operatrve societies in Greater Bombay.
At the end of 1976, the membership of the Board comprised 817 primary co-operatives, 7 central co-operatives and 341 individuals.
In its efforts to spread co-operative movement in the State, the Board conducts two co-operative training colleges, one at Pune and the other at Nagpur, in addition to eleven co-operative training centres in the State and one evening school in Greater Bombay. Under the Member Education Programme, the Board holds secretaries' training classes, managing committee classes, various types of camps, study tours, rallies, etc. The Board also conducts functional courses in marketing, auditing, banking, dairy, etc.
During 1975-76, the number of persons on the roll of secretaries' training classes stood at 27, and the number of persons on the roll of managing committee classes stood at 292.
Co-operative Unions : During the early period of the Twentieth Century the co-operative movement in India suffered from various drawbacks. The Maclagan Committee of 1915 felt that the main hitch was nothing but lack of knowledge and information about the movement. As a result was expounded the idea of setting up a co-operative union, for imparting knowledge to workers in the field of co-operation.
Maharashtra State Co-operative Union, Bomhay: At the Regional Co-operative Conference held in 1917, it was decided to set up such a union and the same was registered on 13th July 1918, under the name of Bombay Central Co-operative Institute. In 1957, the name of the institute was changed to Bombay Provincial Co-operative Union. After the formation of the Maharashtra State in 1960, the Union was renamed as Maharashtra Rajya Sahakari Sangh.
The main objects of the Sangh are to impart education in co-operation and to function as a focussing centre of non-official opinion on various subjects affecting the co-operative movement, to further the spread of co-operative movement, to undertake publicity and publish literature.
The Sangh began its working in right earnest from its inception in 1918. The Sangh battled valiantly when the Thomas Committee Report of 1931-32, came as a death-blow to co-operative movement. During the period, the Sangh brought to the notice of the State Government, the deficiencies in the said report. Besides, the Sangh urged the Government not to take any policy decision with regard to co-operative movement without consulting the workers in the field of co-operation. The movement after making some changes in its structure was reinforced. The Sangh celebrated the Golden Jubilee of co-operative movement in 1954 and its own Golden Jubilee in 1971.
All District Co-operative Boards and Divisional Co-operative Boards which are registered separately under the Act, are affiliated to the Sangh, besides all apex Co-operatives, Urban and District Central Co-operative Banks and other important co-operatives in Maharashtra.
The Sangh has a special women's wing working under the guidance of the Women's Educational Advisory Committee which chalks out and executes educational programme for women. The Sangh convenes State Co-operative Conferences, organises seminars, symposiums, panel discussions, etc.
The Sangh brings out various publications including two fortnightlies one in Marathi viz., 'Sahakari Maharashtra' and the other in English known as 'the Bombay Co-operator ''; one quarterly in English viz., 'The Maharashtra Co-operative Quarterly'. The Sangh has audio-visual propaganda machinery as an effective means of carrying the gospel of co-operation in rural areas.
The principal source of revenue of the Sangh is the education fund collected from the co-operative societies on the basis of their working capital. The societies are under statutory obligation to pay their contribution to the fund. The income of the Sangh, during 1975-76 amounted to Rs. 42,000; while its expenditure during the same period amounted to Rs. 1,21,000.
Bombay District Central Co-operative Bank : This Bank was registered on 6th August 1974 and actually commenced its banking business on 12th February 1975. It has its head office at Palton Road, and has opened three branches, one each at Vile Parle, Dadar and Ghatkopar.
The area of operation of the bank covers the Greater Bombay district as also the New Bombay City. The number of members of the bank on 30th June 1975 was 469 which increased to 1545 upto 30th June 1980. The particulars of its membership are shown below:—
Particulars |
As on 30th June 1976 |
As on 30th June 1980 |
Co-operative Societies |
425
|
1,125 |
| Individual members, Others and Maharashtra State Government. |
175 |
420 |
Total |
600 |
1,545 |
The authorised share capital of the bank is Rs. 5.00 crores.
The paid-up share capital at the time of registration and commencement of banking business was Rs. 11,11,200 and Rs. 11,96,700, respectively. At the end of June 1980, the paid-up share capital of the bank was Rs. 58.42 lakhs, out of which an amount of Rs. 10 lakhs was by way of contribution from the State Government.
The particulars of deposits of the bank are shown below :—
(Rs. in lakhs)
|
Type of Deposits |
1977-78 |
1978-79 |
1979-80 |
Percentage of increase over last year |
1. |
Current Deposits—
(a) Societies
(b) Individuals |
65.89
12.77
|
1,10.68 8.13
|
1,61.47
8.67
|
45.88
6.64
|
2. |
Savings Deposits-
(a) Societies
(b) Individuals |
91.53
27.37
|
2,01.70 39.94
|
2,61.54
45.27
|
29.66
13.34
|
3. |
Fixed Deposits—
(a) Societies
(b) Individuals |
4,23.53 18.62
|
6,91.71
27.49
|
10,91.35 41.22
|
57.77
49.54
|
4. |
Term Deposits-
(a) Societies
(b) Individuals |
1.01
|
0.03
1.69
|
0.41
2.99
|
98.33
76.92
|
5. |
Cash Certificates |
0.04 |
0.11 |
1.09 |
89.90 |
6. |
Call Deposits
|
15.00 |
|
10.00 |
|
|
Total |
6,55.76 |
10,81.48 |
16,24.01 |
50.16 |
The bank has become a member of the Deposit Insurance Corporation of India, and deposits to the extent of Rs. 10,000 are insured by the said corporation. The bank has started fixed deposit scheme linked with various schemes such as Janata personal accident benefit policy scheme, surgical operation scheme, hospitalization scheme. Besides, the bank has also started pension scheme, cash certificate scheme, etc.
The surplus resources of the bank are invested in the form of shares and deposits in the Maharashtra State Co-operative Bank and Government bonds and debentures of the Bombay Municipal Corporation. The total investment of the bank increased from Rs. 40.55 lakhs during 1974-75 to Rs. 10,90.94 lakhs during 1979-80.
The bank being a central financing agency for co-operative sector, has started advancing different types of loans to various societies, such as, co-operative societies, urban credit societies, industrial co-operative societies, housing societies, labour-contract societies, fisheries societies, etc. in Greater Bombay and New Bombay area.
The particulars of the loans advanced by the bank upto the end of June 1976 and 1977 are as follows :—
Particulars |
Amount (Rs) |
Amount (Rs.) |
| Loans advanced (cash credits of overdrafts) |
1,480.50 |
2,883.15 |
| Bills discounted |
6.42 |
2.60 |
| Loans advanced (medium-term) |
8.59 |
3.96 |
| Total |
1,495.51 |
2,889.71 |
The total loans overdue during 1975-76 amounted to Rs. 2.49 lakhs which increased to Rs. 6.91 lakhs during 1976-77. The outstanding short-term and long-term loans as on 30th June 1980 were Rs. 575.96 lakhs and Rs. 13.53 lakhs, respectively.
The actual profit gained by the bank shows an increasing trend in the succeeding years since its inception as the amount of profit went on increasing from Rs.0.71 lakh in 1974-75 to Rs. 6.73 lakhs in 1975-76, Rs. 13.00 lakhs in 1976-77 and Rs. 15.50 lakhs in 1979-80.
The bank has become a member of the Bombay Banker's Clearing House from 1st July 1977, and started participating in clearing house from the same date.
The bank issues demand drafts and collects cheques of the parties under mutual arrangement scheme for Maharashtra, Gujarat and Karnatak States. The bank being a member of the All India State Cooperative Banks Federation issues demand drafts on any State and Union Territory of India.
Maharashtra State Co-operative Bank Limited, Bombay : The Bank was established on October 11, 1911 by a special resolution of the then Government of Bombay. Originally, it started business by taking over from Government the function of financing agriculturists under the Scheme of Taccavi Loans. During the ensuing two decades of otherwise smooth working, the Bank, sometimes, faced critical periods. The Bank could, however, successfully weather through these storms and stood firm on its own strength and emerged even stronger than before. The World War II brought stability to agricultural prices and enabled the Bank to further consolidate its position. The astute and enlightened leadership thus provided by stalwarts in the co-operative movement and the progressive and pragmatic attitude of the State Government helped, to a large extent, in the continued progress and prosperity of the Bank.
During the year 1975 deposits improved to Rs. 162.52 crores from Rs. 151.46 crores in the year 1974 and maintained a satisfactory growth rate. The Bank undertakes various schemes for deposit mobilisation.
After attainment of Independence in 1947, the Bank has not only achieved phenomenal progress in its traditional activities but has also projected a significant image as a Development Bank resulting in consolidation and diversification of the co-operative effort in the State, as also provided a leadership to the co-operative sector of the State. The evolution of the crop loan system of financing agriculture, acceptance of the principle of State-participation in the share capital of co-operatives, the successful organisation of co-operative sugar factories and other processing industries, which became forerunners of producers' cooperatives, the successful implementation of the scheme for monopoly procurement of foodgrains and cotton as the sole agent of the State Government, and the starting of an industrial consultancy cell are some of the significant contributions to the development of co-operative endeavour in the State.
The essential feature of the working of the Maharashtra State Cooperative Bank is its role as a Development Bank. The Bank's entire career has been marked with a spirit of innovation and experimentation. The eminent position it occupies today in the co-operative sphere in the whole country has not been an accident, but it is the result of its sustained progressive policies. The Bank has, thus, played its role as a balancing agent, both in financial terms and in the matter of providing leadership to the co-operative movement. It has been fortunate to have the guidance from outstanding thinkers and the required assistance from the enlightenedadministration of the State, which has enabled it to occupy a premier position in the co-operative banks of the State. The progress of the Maharashtra State Co-operative Bank Limited, Bombay is shown below :—
(Rs. in crores)
Particulars |
1973 (June) |
1975 (June) |
Paid-up Capital and Reserves |
24.63 |
33.05 |
Deposits |
127.81 |
162.52 |
Advances |
164.61 |
233.69 |
Investments |
39.33 |
50.21 |
Total income |
11.84 |
20.02 |
Net profit |
0.87 |
1.39 |
Dividend |
0.50 |
0.78 |
Number of employees .. |
1409 |
1690* |
Number of branches .. |
28 |
34* |
*The figures pertain to 30th September 1975.
Top
JOINT-STOCK BANKS
Historical Background : The present banking system is the outcome of innovations considerably influenced by historical growth and past traditions. The agency houses in Bombay were the pioneers of banking in the city. The earliest mention of a bank in Bombay is recorded in December 1720. It was established for the benefit and advantage of both the Company and the inhabitants, with the capital stock of one lakh rupees advanced by the Company from their cash. The management of the Bank was supervised by the then Bombay Government. During the first twenty-four years of its existence, the bank could not prosper, as the sums were lent on personal bonds and no care was taken of the securities pledged. Besides, some of the debts were of twenty years duration and the carts and houses mortgaged to the bank had fallen into decay even before the settlements of the accounts. Regulations were passed in 1774 to prevent further difficulties arising from large amount of outstanding debts. As a result, the bank worked smoothly for the following thirty years. Again in 1778, the sum due from bond creditors increased to Rs. 28 lakhs and the amount of debt due from the Government treasury to the bank also reached a high figure and the same was increasing annually by the accumulation of interest. Therefore the then Government of Bombay proposed to fix the debt at a certain sum, write it off and establish a new bank. Thus, the career of the first bank was closed.
During the nineteenth century until the establishment of the Bank of Bombay, the banking business in Bombay was carried on by about hundred Hindu shroffs. In 1835, a savings bank was established by the then Government. As the commercial activities were rapidly expanding and Bombay had abundance of capital, the proposal of establishing a Bank of Bombay was first brought forward in 1836.
The Bank of Bombay commenced its working in 1840 with a capital of Rs. 52 1/2 lakhs. The business of the Bank of Bombay was confined to receiving deposits, keeping cash accounts, discounting bills and drafts and other investments. In fact until the establishment of Government Paper Currency Office in 1860, the Bank of Bombay also enjoyed the privilege of issuing bank notes. The Bank of Bombay was afterwards reconstructed in the year 1868. In 1842, another company viz., the Bank of Western India was formed at Bombay to give every facility for the conduct of exchange and other legitimate banking business which was conspicuous by its absence in the charter of the Bank of Bombay. The business of the Bank of Western India was chiefly confined to exchange of loans and deposits and continued its working until 1845, when the shareholders of that bank formed themselves by a fresh deed of agreement into a new company viz., Oriental Bank. In 1845, another banking company under the name of Commercial Bank was formed mainly on the suggestion of native merchants for the purpose of encouraging and assisting the local trade as the two banks mentioned earlier could not serve that purpose. In 1851, there were two banks in Bombay, besides the Government Savings Bank and two branches of other institutions viz., the Oriental Bank of London and the Agra and United Service Bank. During the next five years, three more banks were opened, of which two were branches, one of the North-Western Bank of India and the other of the London and Eastern Bank. The new Chartered Mercantile Bank of India, London and China was of local origin. However, between 1855 and 1863 the branches of the London and Eastern Bank and the North-Western Bank closed their business in Bombay. But the Chartered Bank of India, Australia and China, incorporated by Royal Charter, opened an agency in Bombay and a new bank viz., the Central Bank of Western India was established in Bombay in 1860 with a capital of Rs. 50 lakhs. By 1862, two European Corporations viz., the Sind, Punjab and Delhi Corporation and the Comptoir d' Escompte de Paris, had opened branches in Bombay.
The period between 1861 and 1864 recorded great prosperity, and enormous wealth poured into the city as a result of the cutting off of the American cotton supply.
This sudden increase of wealth led to the widest speculation and resulted in the formation of numerous financial and banking institutions.
In 1867, the Bank of Bengal opened an agency and in 1869 the Honkong and Shanghai Bank and the Agra Bank of London opened their branches in Bombay City.
By 1870, there were eighteen local banks, besides five exchange banks and 32 financial associations and Corporations in Bombay. All of the newly founded banks did not survive after 1871, but the five exchange banks continued their banking transactions.
The banking business flourished steadily upto 1890 and suffered from stagnation between 1890 and 1905. The stagnation was the result of bad seasons and the out break of plague. The chief features of this stagnation period were the closure of the Land Mortgage Bank of India and London, the Agra Bank and the Oriental Bank Corporation; the closing of the Government Savings Bank and the winding up of the National Mortgage Bank.
In 1908, there were in all 12 banks in the city, of which three banks viz., Mercantile Bank of India Limited (1854) (The year in bracket shows the year of establishment of the Bombay branch.), Chartered Bank of India, Australia and China (1858), and the National Bank of India Limited (1863) had their head-offices in London. Besides, four other banks viz., Comptoir National d' Escompte (1861), Hongkong and Shanghai Banking Corporation (1869), Yokohama Specie Bank Limited (1894), International Banking Corporation (1904) had their head-offices at Paris, Hongkong, Yokohama and New York, respectively. The branch of the Alliance Bank of Simla was opened in Bombay in 1903. The Bank of Bengal (Agency) was established in Bombay in 1867.
In addition, the head-offices of three more banks viz., Bank of Bombay, Bank of India, and Indian Specie Bank Limited, were opened in Bombay in the years 1868, 1906 and 1906, respectively.
The development of the commercial banks since 1910, reflects the industrial and the economic growth of the country. The city of Bombay, being an industrial and trade centre, had a good share in the development of commercial banking. The Swadeshi movement that began in 1905 also gave a stimulus to Indian commercial banking and many of the big banks, such as the Central Bank of India and the Bank of India, were established during this period. There was a boom in commercial banking during 1906-1913 which was followed by a crisis during 1913-17. During the crisis, 87 banks failed, the majority of them were the small and weak banks, but the crisis weakened the confidence of the people in the banking system.
A large number of mushroom banks had been established by 1913 (in Western India, as in U.P. and Punjab). They conducted their business in a reckless manner. Their aggregate subscribed and paid-up capital were only 40 and 14 per cent, respectively of the authorised capital. They adopted high sounding names and there was no law to prevent them from resorting to any malpractices and undesirable means. There was mismanagement of funds and the directors misappropriated the funds.
The liquid assets being low, the financial position of the banks was precarious. The larger banks were rather operating on sound lines and were able to withstand the crisis. The difficulties of the banks during crisis were aggravated by the absence of a central bank and lack of co-ordination between these banks, presidency banks and the exchange banks.
There was a brief respite from 1918 to 1921, during which only 21 banks with a total paid-up capital of Rs. 14 lakhs failed. The war and the post-war boom gave another impetus to the starting of banks and a large number of banks, especially for financing industries were established. The post-war boom not merely in banking but also in the economy ended in 1922 and the number of bank failures increased. During 1922-24, it stood at 234 with a total paid up capital of Rs. 6 crores and 10 lakhs. One of the important banks was the Tata Industrial Bank which failed in 1923 and v/as merged later with the Central Bank of India. Of the 342 banks that failed in the country during 1913-14, 49 were in the province of Bombay, the largest number being in Punjab (81). During the Swadeshi movement of 1906, a large number of banks were established in Bombay due to the existence of the port and the speculative activities in cotton and silver in the market.
The dissatisfaction with the banking system led to a demand for enquiry in its working. In 1929, the Government of India appointed a Central Banking Inquiry Committee for a comprehensive survey of the banking system.
The development of commercial banks reflects that the multiplication of branches is a more marked feature of the growth of our banking system rather than extension to new places. The competition for new branches had been chiefly between the Imperial Bank of India and the Indian Joint-stock banks; after 1920 the branch expansion by exchange banks was relatively slow. By 1936, out of the total blanches of 1450, 99 belonged to exchange banks and 360 to Imperial Bank of India and out of the remaining two-third belonged to the smaller banks. The biggest six Indian banks had their branches concentrated in the city areas. The narrow area covering chiefly the Bombay province served by the Bank of India is the indicator of the deliberate policy to adhere to the biggest industrial and commercial centres of the land and that also in the British ' territory.
The details of bank failures in Bombay are given below:—
(1) Bombay Banking Company :—It was established in November 1898 and was liquidated during the banking crisis and panic of 1913-14. The bank had achieved reputation and inspired confidence due to one . of the directors being an eminent medical practitioner of Bombay. The agents were given full freedom by the directors and they used the funds for loans to themselves and prepared false balance-sheets. The shareholders were given good dividend and so did not inquire into the working of the Bank. But a suspicion was created in 1912 when the manager took a trip to United States of America and the depositors withdrew an amount of Rs. 5 lakhs in 1912-13. The director continued to endorse the working of the Bank and to assume the responsibilities he incurred for the hundis submitted to him. But the Bank had to suspend payments, when the withdrawals increased due to the failure of Central Bank of India in Bombay and the agents declared themselves insolvent. The liquidators reported that the bank only maintained one daybook and ledger and they suspected that the registers of securities and pre-notes were suppressed.
(2)The Pioneer Bank, Bombay : It was established in September 1911 and liquidated in December 1916. Its authorised and subscribed capitals were Rs. 50 and Rs. 15 lakhs, respectively and it collected just Rs. 2 lakhs as paid-up capital. In 1913, its deposits were to the tune of Rs. 3 lakhs. Most of the paid-up capital was fake, because as soon as it was collected on the shares it was loaned to the same persons on the security of the same shares. The advantage of this was taken by persons in financial difficulties. When petitions were made on this ground for the winding up of the bank it was argued that this related to internal management. But it was liquidated in 1916.
(3)Credit Bank of India : The bank was started in 1909, with an authorised capital of Rs. 100 lakhs, subscribed capital of Rs. 50 lakhs and paid-up capital of Rs. 10 lakhs. The bank gathered in its fold persons who did not have any training in their jobs. When the bank was liquidated in 1916, the manager of the bank, Jaffer Joosab pleaded ignorance; he even did not know the meaning of the term, 'bill of exchange'. Even the Chairman of the Board of Directors and the auditor pleaded ignorance for all the errors at the trial case.
(4)The Tata Industrial Bank : It was established in 1917 and was warmly supported due to the house of Tatas. But the termination of the war inflation and prosperity and the crisis of 1920, led to the decline in its dividends. These induced sobriety and the shareholders ultimately forced the amalgamation of the Bank with the Central Bank of India. The Bank was established with the objective of financing the industries of Tatas, but the post-war deflation accompanied by the difficulties of the Tata group of industries, disappointed the shareholders who had hoped for very high dividends for the Bank and they voted heavily for amalgamation in July 1923.
(5) The Indian Specie Bank :—It was established in March 1914, with an authorised capital of Rs. 2 crores, subscribed capital of Rs. 1.50 crores and paid-up capital of about Rs. 75 lakhs. It was due to the initiative and enterprise of Mr. Chunilal Saraiya who though a medical person had experience in banking. He played an important part in establishing the Bank of India in 1906 but as the authorities refused to appoint him as its manager, he withdrew. His reputation and ability was highly rated and he was able to attract eminent persons from business life of Bombay to be the directors. But events proved that Mr. Saraiya's inclination was rather speculative. There was a strong rumour that the Bank was cornering silver and in spite of the denial by the Chairman, the Commerce of Calcutta reported that the bank was buying the silver in market on a large scale. Yet the shares of the Bank were put up for Rs. 52 to Rs. 66. The businessmen and the local journal commended the manager Mr. Saraiya for earning a profit of Rs. 25 lakhs at a stroke on the sale of silver at enhanced rates to the Secretary of State in England and the Finance member in India. The Bank came to be linked up with well-known speculators in the city. The Bank resorted to various malpractices, creation of fictitious debtors was active in cotton share speculation and had accumulated losses of more than Rs. 1 crore. The failure of People's Bank in Lahore and the Credit Bank in Bombay in 1913 created panic in public. But the bank paid out Rs. 90 lakhs at the time of the run by the depositors. Yet deposits began to fall. Mr. Saraiya tried to re-establish the confidence and the bank continued to deal in a variety of speculative activities. Ultimately, the sad demise of the manager forced the directors to petition to the Government for voluntary liquidation.
By 1939, the commercial banking structure was firmly established in the country and especially in the industrial cities including Bombay.
However the commercial banks by 1939 had not yet touched two fields. They financed only the internal trade of the country, leaving the foreign trade largely to exchange banks. Secondly, they had little to do with the marketing of agricultural produce or discounting of agricultural bills.
The outbreak of the war and the extension of hostilities by Japan in December 1941, led to large withdrawals of deposits from the banks due to the panic created by the war. But the deposits began to return soon and on the whole the Indian banks stood well at the first shock of war. Thereafter, there was an enormous growth in bank deposits. The expansion of currency was primarily responsible for the rise in deposits, but the rise in prices of shares and commodities and general rise in prices also increased the demand for credit. In August 1939, the deposit liabilities of the scheduled banks were Rs. 249 crores, but at the end of July 1944, they had risen to Rs. 759 crores. The demand deposits increased more than the time deposits. Between September 1939 and September 1944, demand liabilities rose from Rs.1,33 crores to Rs. 5,78 crores, whereas the time liabilities increased from Rs. 1,02 crores to Rs. 1,86 crores. This reflected a higher liquidity of assets of the banks. The cash ratio of the banks was high at 15 per cent by 1945. Advances and bills though higher declined as percentage to total deposits from about 53 in 1939 to 30 in 1944. The opportunities for commercial investments were curtailed and the banks diverted their funds to investment in war loans which rose to 40 per cent of total assets by the end of the war. The volume of capital and reserves had grown but not in proportion to the immense increase in deposits.
Another notable war-time trend was the great increase in the number of banking offices. In the eighteen months ending June 1944, the increase in number was by 688; in the quarter ending December 1943 it was 160; while in the first three months of 1944, the increase was 156. The rate slowed down and was 100 upto September 1944. The increase almost entirely was accounted for by the scheduled banks. Even as regards the expansion of deposits, it was mainly as regards the big banks, the ' Big Five' as they were known in addition to the Imperial Bank of India, the Bank of India, the Allahabad Bank, the Central Bank of India, Bank of Baroda and the Punjab National Bank. The smaller banks opened new branches without a parallel increase in resources, which was a source of weakness for the banking structure. Again new offices were largely opened in big towns to the neglect of small ones and this led to unhealthy branch competition and uneven development of the banks in the country as a whole.
Under the conditions of cheap money, low rates of interest, the bank rate remaining at 3 per cent during the war period, the commercial banks were able to expand and improve their position in the financial structure.
With the end of the war, the earnings and profits of the banks declined sharply and many banks were in difficulties and a number of banks failed. The partition of the country with Independence in 1947, adversely affected a number of banks which had branches or head-offices in Bengal and Punjab. A banking crisis was avoided by the Reserve Bank of India providing the necessary help to these banks. Yet a few banks failed during this period. By 1949, the economic conditions in the country were normal but the deficits in the budgets of the Union Government continued, which meant continuous expansion in the currency supply. The banking deposits continued to expand and with that the branches of the commercial banks. The Reserve Bank realised the need for the regulation of the banking system and suggested legislation which led to the Banking Companies Act of 1949. The banking system suffered from certain basic defects.
The defects were to be removed in the interest of establishing a sound banking system which was necessary for the rapid growth of the economy. The Banking Companies Act, 1949 was enacted for achieving this objective. Formerly, the joint-stock banks were governed by the General Companies Act of 1913. This Act was amended in 1936, and included some specific provisions for the banks such as, a bank could not be managed by a managing agency. Yet, there was no specific regulation of the banks. The Banking Regulation Act, 1949, is a comprehensive legislation applied to all banking companies including co-operative banks.
The period from 1949 to 1955 can be described as that of amalgamation of the banks and the consolidation of the banking structure. With the powers acquired by the Reserve Bank, a number of amalgamation of commercial banks were brought about. Small banks were amalgamated with bigger banks and the uneconomic branches of the banks were closed down. With the removal of the weak links in the banking structure there was an improvement in the efficiency of the banks. The deflationary trend during 1952-54 reduced the profits of banks and compelled the banks to reduce their costs of operations by improving their efficiency.
Under the Banking Companies Regulation Act of 1949, the Reserve Bank of India was given the responsibility of assisting as an intermediary in proposals for amalgamation of banks on a request from such banks. Reserve Bank of India attempted to merge the weak and inviable banks with strong and viable units. But the procedure of amalgamation was slow and complex. The Act was amended in 1950 to simplify the whole process. Yet amalgamations depended on the initiative and will of the banking companies. So the consolidation of the banking structure was dependent on the mercy of the small banks. But when the Pilai Bank was closed in 1960 and the Laxmi Bank was compulsorily wound up by the High Court, Bombay, the Indian banking system was widely disturbed. Thereupon the Banking Companies (Second Amendment) Act, 1960 was passed empowering the Reserve Bank of India to apply to the Central Government for an order of moratorium in respect of a weak and inviable bank. The Reserve Bank of India was empowered to prepare a scheme of reconstruction of the banking company or its amalgamation with another banking company, which had to be approved by the Central Government with modifications, if any. Thus the Reserve Bank of India was empowered to compulsorily merge a sick bank with a healthy bank. In preparing the scheme, the Reserve Bank of India was working with the State Bank of India; some weak banks were merged with the State Bank as its subsidiaries. Between 1960-65, the total number of mergers and amalgamations under the Act were 188, out of which voluntary amalgamations accounted for 20 only. Between 1960-65, 56 banks were granted moratorium. Of these, 45 were compulsorily merged with other banks and one was allowed to go into compulsory liquidation. Three banks were ordered to be wound up and one was allowed to amalgamate voluntarily with another bank. The number of compulsory mergers was 30 in 1961, though it slowed down later on.
The bank mergers have been greatly beneficial to transferee banks, transferor bank, depositors and the solidarity of the banking structure of the country as a whole. As the amalgamations were brought about through the Reserve Bank of India, the interests of the depositors were properly looked after. The weak and inviable banks were being eliminated and this improved the strength of the banking structure. The quality of the structure went on improving and a healthy tone was provided to the system. In the following statement is shown the statistics of the bank mergers :—
Year |
Total number of bank mergers |
Year |
|
Total number of bank mergers |
1960 |
7 |
1963 |
|
22 |
| 1961 |
36 |
1964 |
|
79 |
| 1962 |
11 |
1965 |
|
33 |
1960-65 |
|
|
Total . |
188 |
Training institutes for bankers were established by the Reserve Bank and internal examinations were introduced. The trained banking personnel were being provided to the banks. All this introduced efficiency and maturity in the operations of the banks. The Reserve Bank was also able to establish its effective control over the commercial banks. The use of the powers given by the Banking Regulation Act of 1949 and the functions of licensing, inspection, supervision established a continuous contact between the banks and Reserve Bank of India. By the end of the First Plan, 1955-56, the Reserve Bank of India had established its position as the leader of the commercial banks and the money market in the country.
With economic development of the country under the plan and the rapid growth of industries, the demand for credit went on expanding. The commercial banks had consolidated their position during the earlier period and were able to expand credit after 1956.
There have also been a number of basic functional and structural changes in the working of the commercial banks. In a survey of the Reserve Bank of India ia April 1972, according to the data supplied by 43 banks (including all Indian Banks with deposits of Rs. 25 crores and above), the medium-term credit to industry provided by them amounted to Rs. 78.6 crores which was equal to 14 per cent of their total outstanding credit to industry. The establishment of the Industrial Development Bank of India has shifted the responsibility of financing large industries from the commercial banks, yet the refinancing of industrial loans advanced by commercial banks stood at Rs. 38 crores on June 30, 1969. In spite of the State financing institutions, the commercial banks are extending their role in providing term finance to industries.
There was also a change in the security pattern of bank credit. For bank advances, between 1951 and 1962, advances against agricultural commodities rose by 51 per cent, while those against manufactures and minerals rose by 100 per cent which again reflects the importance of new industries.
There have been certain structural changes in the commercial banking system. An important feature has been a marked reduction in the number of banks through the elimination of weaker units as a result of voluntary or compulsory mergers. There had been no contraction in banking facilities, though there had been a decline in the number of banks from 566 in 1951 to 89 in June 1969. During this period there had been an increase in the number of bank branches from 4,151 to 8,254. There had been a rapid expansion of branches to the non-urban areas.
With the nationalisation of fourteen major Indian banks by the ordinance in July 1969, a revolutionary change took place in the banking structure. These 14 banks had 3,770 branches (49 per cent of the total), deposit liabilities of Rs. 2,742 crores (58 per cent of the total) and advances of Rs. 1,744 crores (55 percent of the total) on 31st December 1968. About 83 per cent of the banking business was controlled by the Public Sector (1970) with these fourteen banks and the State Bank of India and its subsidiaries. Out of the remaining 17 per cent business in the private sector, 6 per cent of the banking business was in the hands of the Indian scheduled banks (36), 10 per cent was in the hands of banks incorporated outside India (15) and the non-scheduled banks having only 1 per cent of the total. Through the control of the Reserve Bank of India and the institutions such as Industrial Development Bank of India and Agricultural Refinance Corporation, the commercial banking structure is linked up to various State-sponsored financial institutions in the country and an attempt is made to build up a co-ordinated financial infrastructure consistent with the needs of rapid economic growth of the country.
Before the nationalisation of commercial banks in 1969, an experiment with a scheme of social control of banks was introduced. It was shortlived, yet it led to the establishment of the National Credit Council at an all-India level. It was envisaged as an instrument of credit planning and it was to lay down guidelines for the banks with regard to the provision of credit. On the council various economic interests were represented. The council indicated the quantity and quality of credit that banks should furnish for each sector and each industry in the economy.
Under the social control policy, the banking companies were asked to reconstitute their board of directors to represent the various economic interests in the country. Each board was to have a professional banker as it's full-time chairman. In 1968, the Banking Regulation Act was amended accordingly to implement the policy of social control over banking credit. Every foreign bank was to have an advisory board. The banks were prohibited from advancing loans to directors or to concerns in which the directors were interested. The social control provisions widened the scope of the powers of Reserve Bank of India as regards advances of the commercial banks. The Government was even empowered to take over any bank which consistently refused to follow social control provisions and policies.
The Government of India set up the National Credit Council with the Finance Minister as Chairman and the Governor of the Reserve Bank of India as the Vice-Chairman.
The Indian commercial banks accordingly reconstituted their boards and the foreign banks had set up advisory boards. The policy of social control was introduced by 1967, but the experiment was hardly implemented and there was the demand for nationalisation of commercial banks. A number of arguments were advanced in favour of the proposal and they were accepted as the basis for the decision of nationalisation of 14 big Indian commercial banks in 1969.
It was argued that over the past twenty years, a very close link had been established between the commercial banks and well-known industrial houses. This led to a kind of concentration of financial and economic power which was reflected in the functioning of the commercial banks. Further the directors of these banks attempted to use the resources of the banks for the industrial concerns in which they were interested. This led to the diversion of funds from the rural and semi-rural sectors to the large-scale industries situated in the urban areas. The small industrial and business units suffered from the scarcity of funds as they had to compete with the big concerns. These arguments against the functioning of private commercial banks were examined by a number of individuals and groups in the country. For quite some time in 1968, after the introduction of social control policy, discussion on the question of nationalisation of commercial banks was very wide-spread. Ultimately in 1969, the Government announced its decision to nationalise 14 big banks in the country. The private banking companies were compensated by the Government. The total amount of compensation payable to 14 nationalised banks had been determined at Rs. 87.4 crores.
The immediate impact of nationalisation was the acceleration of deposit mobilisation and of lending to the priority sectors. Aggregate deposits of the scheduled commercial banks registered an increase of Rs. 621 crores in 1969, as against a rise of Rs. 493 crores in 1968. This can be largely attributed to the ambitious plan of branch banking adopted by the nationalised banks. Direct and indirect finance extended to agriculture by the nationalised banks increased from Rs. 27 crores at the end of June 1969 to Rs. 66 crores at the end of June 1970. By adding the assistance given by the State Bank and it's subsidiaries, the total assistance to agriculture rose upto Rs. 216 crores at the end of June 1970. The advances of the nationalised banks in favour of road transport operators had been more than doubled during the period of seven months rising from Rs. 6 crores to Rs. 13 crores. Self-employed persons received Rs. 2 crores worth of bank finance at the end of January 1970 as against Rs. 30 lakhs at the end of January 1969. Taking the entire public sector banking system, the assistance to the newly defined priority sectors and the so-called neglected sectors increased by Rs. 166 crores to Rs. 604 crores by the end of January 1970. The target for the opening of the branches especially in the rural areas had been placed at 71,350 in 1970, as against 1,035 in 1969.
Even after the Regulation of Banking Act of 1949, there had been failures of banks from year to year. The bank failure partly were attributed to the laissez-faire policies of the Government and the laxity of the laws and dishonesty of the promoters. The bank failures had a very deterrent effect on the confidence of the public in the banking institutions, and there were always cumulative runs on the banks with the consequential danger of banking crisis. In 1950, the Rural Banking Enquiry Committee had stressed the need for the establishment of a Deposit Insurance Corporation but no decision was taken. In 1954, the committee on finance for private sector under the Chairmanship of Shri A. D. Shroff had recommended the introduction of deposit insurance in the country.
The Banking Companies Act was also amended in 1960, to give additional powers to the Government and the Reserve Bank to provide for expeditious payments to the depositors of banks in liquidation, and rehabilitate banks in difficulties. But these measures were not sufficient, and hence, bank nationalisation was inevitable.
Banking in the city of Bombay : (1) 1960-66 : The data of the functioning and development of banks in the city of Bombay is available from 1960. The same is given in Tables Nos. 1 and 2.
During the period 1960-66, the number of reporting bank offices increased from 186 to 327. The total average of month-end deposit balances increased over the period from Rs. 3,48 crores to Rs. 6,65 crores;
TABLE NO.1
BANKING BUSINESS OF SCHEDULED COMMERCIAL BANKS BOMBAY CITY
