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

 

 

 

		Average of month-end deposit balance			Total debits to			Total of approved limits as at the end of the year
Year	No. of reporting offices	Government and Quasi-Government bodies	Business and Individuals	Total (2+3)	Government and Quasi-Government bodies	Business and Individuals	Total (5 + 6)	Cash Credits and Overdrafts		Other
								Government and Quasi-Govemment bodies	Business and Individuals	Government and Quasi- Government bodies	Business       and          Individuals	Total (8+9 + 10+11)
	1	2	3	4	5	6	7	8	9	10	11	12
1960	186	41.3	307.1	348.4	545.8	5,652.0	6,152.8	4.8	317.6		173.9	496.3
1961	204	45.6	313.4	359.0	612.4	5,938.4	6,550.8	1.8	321.7		185.3	508.8
1962	224	48.6	331.4	380.0	692.7	6,446.6	7,139.3	5.3	382.0	2.3	207.7	597.3
1963	266	64.6	383.6	448.2	893.5	6,653.6	7,547.1	9.6	488.8	0.8	255.8	755.0
1964	299	77.0	454.8	531.8	1,140.3	7,736.6	8,876.9	20.8	523.0	1.3	316.4	861.5
1965	.321	78.8	532.1	610.9	811.5	8,792.0	9,603.5	23.8	558.2	0.7	404.1	986.8
1966	327	81.0	583.6	664.6	1,019.4	10,063.5	11,082.9	26.8	629.8	4.8	365.0	10,026.2

TABLE No. I - contd.

Year	Debits to Cash Credits and Overdrafts		Average of month-end bank Loans and Bills		Credit outstanding during the year Cash Credits and Overdrafts		Total (15 + 16+ 17+18)	Annual Rate of Turnover of Current Deposits	Overall Annual Rate of Turnover
	Government and Quasi- Government bodies	Business and Individuals	Government and Quasi-Government bodies	Business and Individuals	Government and Quasi-Government bodies	Business and Individuals		Business and Individuals	Business and Individuals
	13	14	15	16	17.	18	19	20	21
1960	8.9	1,998.5		89.8	1.8	185.1	276.7	39.6	15.8
1961	19.3	2,163.4		97.9	0.7	208.9	307.5	46.0	17.0
1962	39.50	2,370.2	1.0	100.6	2.2	207.6	311.4	50.0	16.3
1963	91.2	3,207.8	2.4	144.3	3.8	282.8	433.3	49.4	15.1
1964	121.2	3,898.2	2.6	174.2	11.9	319.4	508.1	48.2	16.3
1965	226.4	4,770.2	5.2	185.7	19.0	371.6	581.5	43.0	16.9
1966	334.7	5,079.3	5.3	223.8	15.9	373.5	618.5	51.4	17.3

TABLE NO. 2
DEPOSITS,CREDITS AND OVERDRAFTS WITH SCHEDULED COMMERCIAL BANKS, BOMBAY

(Rs. in crores)

Year	No of reporting offices	Average of month-end deposit balance				Total debits to				Total of approved limits of cash credits and overdrafts as at the end of the year	Debits to cash cxredits and overdrafts	Annual rate of tunrover of Current Deposits	Overall annual rate of turnover
		Curretn	Savings	Fixed	Total(3+4+5)	Current Deposits Accounts	Savings Deposit Accounts	Fixed Deposit Accounts	Total (7+8+9)
1	2	3	4	5	6	7	8	9	10	11	12	13	14
1960	186	1,36.7	36.7	1,75.0	3,48.4	54,31.6	62.3	7,03.9	61,97.8	3,22.4	20,07.4	39.7	16.2
1961	204	1,25.1	42.5	1,91.4	3,59.0	57,40.5	73.7	7,36.6	65,50.8	3,23.5	21,82.7	45.9	17.7
1962	224	1,24.7	47.9	2,07.4	3,80.0	62,40.9	92.3	8,06.1	71,93.3	3,87.3	24,09.7	50.0	16.9
1963	266	1,35.8	62.2	2,50.2	4,48.2	66,90.1	1,26.2	7,30.8	75,47.1	4,98.4	32,99.0	49.3	15.8
1964	299	1,57.7	75.0	2,99.2	5,31.8	78,00.1	1,53.3	9,23.5	88,76.9	5,43.8	40,19.4	49.5	16.8
1965	321	1,89.3	90.8	3,30.8	6,10.9	82,96.6	2,06.0	11,00.9	96,03.5	5,82.0	49,96.6	43.8	17.2
1966	327	1,87.7	1,19.6	3,57.3	6,64.6	96,43.0	3,18.5	11,21.5	1,10,82.9	6,56.6	54,14.0	51.4	17.8

current deposits increased from Rs. 1,37crores toRs. 1,88 crores; savings from Rs. 37 crores to Rs. 1,20 crores; and fixed deposits from Rs. 3,48 crores to Rs. 6,65 crores. The total debits to total deposits increased from Rs. 61,98 crores in 1960 to Rs. 110,83 crores in 1966. Total approved limits as at the end of the year (i.e., cash credits and overdrafts) increased during the period from Rs. 3,22 crores to Rs. 6,57 crores and the debits to cash credits and overdrafts rose from Rs. 20,07 crores to Rs. 54,14 crores. Annual rate of turnover of current deposits increased from 40 to 51 which reflects an increase in the velocity of circulation of money. The overall annual rate of banking turnover increased from 16.2 to 17.8. All these rising trends indicate the expansion of demand for and the faci­lities for the provision of credit in the city. The expansion of industries over the period and the opening of new branches increased the deposits of the commercial banks and also the mobilisation of larger financial resources by the banking system.

The development in banking in the city of Bombay can be further reviewed in the context of the development in Maharashtra. The Reserve Bank data gives the trends over the period 1960 to 1966. The data for relates to the former bilingual State and therefore the data from to 1966 is relevant. The total number of reporting banking offices in the State increased from 525 in 1961 to 811 in 1966. Total deposits (average month-end deposit balances) increased over the same period from Rs. 4,18 crores to Rs. 8,04 crores. They were mostly the deposits of the business and individuals. The deposits of Government and quasi-government bodies in 1966 were Rs. 95 crores. The credits advanced by the banks were mainly in two forms, loans and bills and cash credits and overdrafts. Total of the approved limits by the banks in Maharashtra under both these heads were Rs. 5,63 crores in 1961 and Rs. 11,44 crores in 1966. These reflect the increasing demand for credit from the private business sector due to the expansion of industries and business in the State. Annual rate of turnover of current deposits (businessmen and individuals) in 1961 was 45 which increased to 51 by 1966, reflecting an increase in the velocity of circulation of money due to the larger business demand for banking facilities.

The data in relation to the city of Bombay indicates similar trends as those in Maharashtra, but in a more sharper manner. The number of reporting offices in the city increased from 186 in 1960 to 327 in 1966. The average of month-end deposit balances increased from Rs. 3,48 crores in 1960 to Rs. 6,65 crores in 1966. Total debits to various individuals, Companies etc., increased over the period from Rs. 61,98 crores to Rs. 1,10,83 crores and the total of approved limits as at the end of the year increased from Rs. 4,96 crores to Rs. 10,26 crores. Debits to cash credits and  overdrafts increased from Rs.  19,99 crores to Rs. 50,79 crores. Average of month-end bank credit outstanding; during the year increased from Rs. 277 crores in 1960 to Rs. 619 crores in 1966. Annual rate of turnover of current deposits (businessmen and individuals) increased over the same period from 39 to 52, reflecting quite a sharp increase in the velocity of circulation of bank credit. All these trends indicate the rapid expansion of industries and business in the city of Bombay, more remarkable than in other areas of Maharashtra and the consequential expansion of credit and the banking facilities to these sectors. The commercial banks were able to expand their supply of credit in a flexible manner and satisfy the rising demand in the city.

(2) 1966-70 : Among the eight big cities in India, Bombay was the most important in respect of the total number of bank offices, deposits and credit. During 1966-70, Bombay added more offices and recorded higher increases in total deposits and credit than any other centre. Bank offices increased by 135. There has been quite significant increase in the deposits in city branches, though the growth rate of deposits in Bombay might appear lower than that in several other centres. However, considering the high level of deposits in the centre, the quantum of rise in terms of a percentage growth rate of 11.6 is actually quite substantial. The fact that Bombay combined the largest increase in offices and deposits with a fairly marked rise in the average deposit per office shows the extraordinary potential that the city offers for deposit mobilization. In Bombay, credit increased by a larger amount than deposits, the credit-deposit ratio was close to 100 per cent. For all banks in the metropolitan centres taken as a whole, new offices accounted for slightly more than a quarter of the total deposit increase over the period.

There was heavy concentration of banking in business areas. Although the number of offices situated in these areas was relatively small, a strikingly high proportion of the total banking business in the centre was handled by them. This was not merely in terms of credit but equally important in respect of deposits. The areas were further responsible for much of the deposit acceleration over the period 1966-70. The proportion of deposits secured by the offices in these areas was also considerable. In each of these centres, the business areas had well over half of the city's aggregate deposits, though the number of bank offices operating in these areas was accounted for around a third of the total. In Bombay, during 1966-70, out of the 135 new offices opened, only 21 were in this area group while in Calcutta, the proportion was slightly higher at 15 out of 75. It can be stated that the intensity of banking in these areas increased as indicated by the sizable rise in the average deposits per office. The business areas were responsible for at least half the deposit increase in the city as a whole. The individual accounts may not be important here as in business areas, deposits would be mainly institutional or commercial and generally consequent to or following an extension of credit.

The following statement  shows the residential area-wise percentages of banking business undertaken in Greater Bombay in 1970:—

Residential Area*	Percentage of offices in the area to the total in the centre	percentage of deposits in the area to the total in the centre
I	18.7	9.7
II	7.0	5.0
III	29.1	9.5
Total	54.8	24.2

 

Residential Area	Average deposits per office (Rs. in lakhs)	Percentage of cerdit in the area to the total in the centre	Average credit per office (Rs. in lakhs)
I	121.9	3.1	38.4
II	167.3	2.5	82.1
III	76.7	4.0	32.0
Total	103.8	9.6	40.6

* The details of areas covered under these residential groups are  given on the subsequent page.

The metropolitan cities provide remarkable scope for banking business. The marked rise in the average deposit per office indicated that the spread of the metropolitan city branch net-work had indeed been accompanied by an overall rise in deposits and not as was sometimes feared in business. The deposits that centre obtained from even a pure residential or non-business area of a city were generally higher than what an office in an urban or rural centre would bring in. The average deposit per office of rural branches of scheduled commercial banks was only Rs. 13.4 lakhs (September 1970). As against this the average even among the residential areas in Bombay was Rs. 103.8 lakhs. This degree of deposit potential was advantageous in evolving the strategy of branch expansion in Greater Bombay.

The following statement shows that in 1951, Bombay city accounted for over a fourth (26.5 per cent) of the all India figure of current deposits and less than a third (30.3 per cent) of their debits. Over the years, the share of big cities (Bombay, Calcutta, Madras and Delhi) declined and in 1966, Bombay and Calcutta accounted for 23.8 per cent and 14.5 per cent of total current deposits, as regards debits to the share of these cities declined to 27.1 per cent and 22.0 per cent, respectively. The following statement gives statistics of current deposits, debits and turnover of current deposits in Bombay during 1951, 1956, 1961 and 1966:—

(Amount in crores of Rs.)

	1951		1956		1961		1966
Particulars	Amount	Percentage to all India total	Amount	Percentage to all India total	Amount	Percentage to all India total	Amount	Percentage to all India total
Current Deposits	1,11.2	26.5	1,34.4	29.2	1,25.1	24.6	1,87.7	23.8
Debits to Current Deposits Accounts	53,23.4	30.3	58,17.6	29.2	57,40.5	27.8	96,43.0	27.1
Turnover of Current Deposits	47.9		43.3		45.9		51.4

* Figures for the years 1951 and 1956 are year-end figures of deposits; while for the years 1961 and 1966 figures of amount are month-end averages during the years.

In 1951, the four big cities (Bombay, Madras, Calcutta and Delhi) accounted for as much as 60.6 per cent of total current deposits and 69.9 per cent of total debits. In 1966, these four cities accounted for 51.1 per cent of current deposits and 59.9 per cent of debits thereto. The turnover of current deposits in 1966 at Bombay was 51.4 crores; at Calcutta 68.2 crores; and at Madras 56.3 crores.

The following statements show the comparative statistics of banking business in Bombay:—

Particulars	1966	1970
Number of bank offices	347	482
Outstanding deposits (Rs. in crores)	7,30	11,29
Credit (Rs. in crores)	6,90	11,12
Average deposit per office (Rs. in lakhs)	2,10	2,34
Average credit per office (Rs. in lakhs)	1,99	2,31
Compound annual giowth rate of deposits	N.A	11.6
Compound annual growth rate of credit	N.A	12.6

 

Particulars	Increase during 1966-70
No. of bank offices	135
Total deposits (Rs. in crores)	3,99
Total credit (Rs. crores)	4,22

 

Average deposit per office of new offices at the end of every year of establishment	Rs. in lakhs
First year of establishment	15.61
Second year of establishment	35.54
Third year of establishment	50.40
Fourth year of establishment	60.30
Fifth year of establishment	80.57

Areas covered under the respective business and residential areas in Bombay are shown in the following statement :—

Area number	Areas covered
Business area I	Fort, Ballard Estate.
Business area II	Kalbadevi, Zaveri Bazar, Bhuleshwar, Mandvi, Opera House, Sandhurst Road, Lamington Road, Thakurdwar.
Residential area I	Substantial extent of business activities— Worli,    Prabhadevi,   Mahim,    Bandra, Dadar, King's Circle, Sion, Wadala.
Residential area II	More selected or exclusive residential localities—Cumballa Hills, Walkeshwar Road, Peddar Road, Breach Candy, Colaba, Churchgate.
Residential area III	Less affluent or more middle class neighbourhoods—Chembur, Ghatkopar Vikhroli, Bhandup, Kurla, Mulund, Santacruz, Vile Parle, Andheri, Malad, Borivli.

The business area-wise information of banking business in Bombay during 1966 and 1970 is shown in the following statement :—

Business area	Percentage of office in the area to the total in the centre		Percentage of deposits in the area to the total in centre		Contribution of the area to deposit growth in the centre	Average deposit per office (Rs. in lakhs)		Percentage of credit in the area to the total in the centre	Average credit per office (Rs. in lakhs)
	1966	1970	1966	1970	1970	1966	1970	1970	1970
1	2	3	4	5	6	7	8	9	10
Business area I	17.0	13.4	58.8	58.5	58.0	7,27	10,16	74.1	12.67
Business are II	21.9	18.9	11.1	10.1	8.2	1,07	1,25	6.1	75
Total for Greater Bombay	38.9	32.3	69.9	68.6	66.2	3,78	4,96	80.2	5,72

TABLE. No. 3
List of Commercial Banks (Directory of Bank Offices, December 1980 Reserve Bank of India.) and Their Branches in Greater Bombay, at the end of December 1980

Name of Bank	No. of branch offices, sub-branch offices including head office, transacting banking business	No. of offices not transacting banking business, i.e. registered offices or administrative offices, etc.
(1)	(2)	(3)
Allahabad Bank	14	1
Andhra Bank	7	1
Bank of Baroda	69	10
Bank of Cochin	1
Bank of India	70	4
Bank of Karad	3
Bank of Madura	5
Bank of Maharashtra	58
Bank of Rajasthan	5
Banares State Bank	1
Bharat Overseas Bank.	3
CanaraBank	59	6
Catholic Syrian Bank .	2
Central Bank of India .	62	6
Corporation Bank	15	1
Dena Bank	77	3
Federal Bank	4	1
Grindlays Bank	11
Habib Bank	1
Indian Bank	25
Indian Overseas Bank .	29	1
Jammu and Kashmir Bank	1
Karnatak Bank	5
Laxmi Commercial Bank	2
Maharashtra State Co-operative Bank	32
New Bank of India	8
Oriental Bank of Commerce	9
Punjab and Sind Bank.	11
Punjab National Bank.	20	11
Ratnakar Bank	2
Reserve Bank of India.	2 (1 central office)
Sangli Bank	14
South Indian Bank	2
State Bank of Bikaner and Jaipur	8
State Bank of Hydrebab	11
Sate Bank of India	85	1
Sate Bank of Indore	3	1
Sate Bank of Mysore	5
Sate Bank of Patiala	1
Sate Bank of Saurashtra	5
Sate Bank of Tranvancore	2	1
Syndicate Bank	37	3
Tamilnadu Mercantile Bank	1
Union Bank of India	65	1
United Bankof India	14	1
United Commercial Bank	33	1
United Industrial Bank	1
United Western Bank	15	1
Vijaya Bank	17	2
Vyasa BAnk	3

Deposits and advances of all scheduled commercial banks in Bombay are given in the following statement:—

(Rs. in lakhs)

As on last Friday of	No of functioning offices	No of reporting offices	Deposits (Rs)	Advances* (Rs)
1	2	3	4	5
June 1970	480	469	10,40,60	10,34,56
June 1973	606	606	15,83,67	14,13,94
December 1975	N.A	729	21,70,78	20,36,66

* In the case of advances, the reporting offices are recorded as 463.

The above statement reveals the increasing trend in the total deposits and advances of all scheduled commercial banks in Bombay along with the number of banking offices. The percentage of deposits to advances has also increased from about 87.5 to 91.0 during 1973-75.

The deposits and advances of scheduled commercial banks in Bombay according to type as on last Friday of June 1973 revealed that the fixed deposits were the largest in amount.

As against this, the savings deposits as on last Friday of June 1973 stood highest in respect of number of accounts, and the same are shown in the following statement :—

(Amount in lakhs of Rs.)

No. of Functioning offices	No. of Reporting offices	Current		Savings
		No. of accounts	Amount	No. of accounts	Amount
606	606	3,40,441	3,93,34	2,34,8,673	3,12,43
Fixed		Others		Total
No. of accounts	Amount	No. of accounts	Amount	No. of accounts	Amount
6,64,704	8,46,73	22,233	28,40	33,76,051	15,80,90

                                                       
The affluent society and businessmen have the tendency to put large amounts in the fixed deposit accounts. However, the number of fixed deposits is generally less than that of savings deposits.

The deposits and credits of 939 scheduled commercial banks at the end of March 1981 amounted to Rs. 50,50,87 lakhs, and Rs. 47,21,74 lakhs, respectively.

Table No. 4 reveals the occupation-wise classification of outstanding credit of scheduled commercial banks in Greater Bombay.

TABLE No. 4
Occupation-wise Classification of Outstanding Credit of Scheduled Commercial Banks in Greater Bombay

(Amount in thousands of Rs.)

Occupation	As on the last Friday of
	June 1973		December 1975
	No of Accounts	Amount	No of Accounts	Amount
I. Agriculture and Allied activities:	855	25,49,11	714	38,21,62
1.Agriculture excluding plantations	492	20,66,97	391	35,88,47
(i) Direct finance	306	1,09,11	176	3,11,17
(ii) Indirect finance	186	19,57,86	215	32,77,30
2. Allied activities	337	1,84,02	299	1,94,06
3. Plantations	26	2,98,12	24	39,09
II Industry:	34,010	7,01,70,21	39,546	11,13,97,30
1. Mining and quarrying	50	96,10	36	1,27,80
2. Manufacturing	23,639	6,32,87,54	28,075	10,01,30,18
3.Electricity generation, Transmission and distribution	236	17,88,17	275	22,47,70
4. Construction	562	16,09,91	643	17,23,02
5. Transport	3,623	13,09,70	3,407	34,85,45
6. Personal and professional services	5,900	20,78,79	7,110	36,83,15
III. Trade	24,995	2,41,70,69	26,118	3,02,69,60
1.Wholesale trade	17,558	2,25,76,66	17,556	2,79,11,71
2.Retail trade	7,437	15,94,03	8,562	23,57,89
IV. Personal loans (including consumer durables)	25,933	29,65,07	36,150	43,93,34
V. All others	26,412	97,72,79	29,724	70,68,86
Total bank credit (I+II+III+Iv)	1,12,205	10,96,27,87	1,32,252	15,69,50,72
Of which: samll scale industry	16,964	97,96,25	19,546	1,47,86,53

It can be seen from the table relating to occupation-wise classification of outstanding credit that the total bank credit of scheduled commercial banks increased from about Rs. 10,96 crores in June 1973 to about Rs. 15,69 crores in December 1975. The increase in the amount of bank credit can also be noticed in all the occupational groups, such as, agricultural and allied activities, industry, trade and personal loans.

This trend indicates the expansion of industries and business in Bombay. In the group of industries, manufacturing industries absorbed the highest amount of bank credit which amounted to about Rs. 6,33 crores in June 1973, and subsequently increased to about Rs. 10,01 crores in December 1975. As against this, the mining and quarrying industries had utilised the lowest amount of bank credit which amounted to about Rs. 92 lakhs and about Rs. 1,28 lakhs in June 1973 and in December 1975, respectively.

The classification of outstanding credit of scheduled commercial banks in Greater Bombay as in the month of June 1980 (Banking Statistics—BSR. June 1980, published by Reserve Bank of India.) is shown below:—

Occupation	No. of accounts	Amount in 000's of Rs.
(1)	(2)	(3)
Agriculture	5,536	490,7,52
Industry	37,682	19,85,22,26
Transport operators	10,337	2,75,13,29
Services	17,718	50,07,38
Trade	37,054	6,59,24,98
Personal loans	73,846	75,77,04
All others	59,932	1,08,29,29
Total Bank Credit	242,105	32,01,64,76
Of which for small scale units	24,264	2,54,69,94

Nationalised banks : By an ordinance of 19th July 1969, 14 banks were nationalised. They are (i) Central Bank of India, (ii) Bank of India, (iii) Punjab National Bank, (iv) United Commercial Bank, (v) United Bank of India, (vi) Canara Bank, (vii) Dena Bank, (viii) Syndicate Bank, (ix) Union Bank of India, (x) Bank of Baroda, (xi) Allahabad Bank, (xii) Indian Bank, (xiii) Bank of Maharashtra, and (xiv) Indian Overseas Bank.

All these nationalised banks have their branches located in Greater Bombay. Information regarding the working of some of these banks is given in the following pages.

(1) Indian Overseas Bank : The first branch of the Indian Overseas Bank in Bombay City was opened in the Fort area in September 1941 and upto nationalisation, nine more branches were added to the list and the number went upto 18 by the end of June 1973.

Upto June 1973, these eighteen branches together had gathered deposits to the tune of Rs. 22.87 crores which formed about 14 per cent of the total bank deposits in the country.

The type-wise break-up of deposits in these branches by the end of June 1973 is shown below:—

Type of Account	Amount (Rs. in lakhs)	Percentage to total deposits
1. Current accounts	6,59.02	28.8
2.Savings accounts	4,82.26	21.1
3.Term deposit accounts	11,45.97	50.1
	22,87.25	100.00

Of the bank's total credit in the country, about 12.4 percent i.e., Rs. 12.15 crores was utilised to finance various sectors of the economy in Bombay city. The credit-deposit percentage ratio for all the eighteen branches together, stood at 53.1.
The following statement gives the amount of credit given by these branches to various sectors of the economy in Bombay by the end of June 1973:—

Type of credit	Amount (Rs. in lakhs)
(a) Priority sector—
1. Agriculture	46.1
2. Small scale industry	1,53.5
3. Transport operators	14.2
4. Retail trade	18.4
5. Professional and self-employed	5.7
Total of priority sectors	237.9
(b) Others—
1. Medium and large industry	4,28.5
2. Wholesale trade	4,11.4
3. Others	1,37.1
Total	977.0
Grand Total	12,14.9

Apart from the disbursement of the total credit of Rs.12.15 crores to various sectors of the economy, the bank invested Rs. 4.60 crores in various securities issued by the State Government and other State sponsored agencies.

Since nationalisation, the bank has introduced several new services including a number of attractive need-based savings schemes.

(2) United Commercial Bank : Prior to the nationalisation of banks, the bank was known as the United Commercial Bank Ltd. and was established in Bombay in 1943. It is one of the biggest five commercial banks of the country. Upto September 1971, the bank opened 21 branches in Bombay.

Particulars of the loans advanced by the bank to small scale industries, agriculturists and others as on 31st December 1971 are shown in the following statement :—

Particulars	No of Accounts	Amount (Rs. in thousands)
Raod transport	83	8,51
Small scale industries	307	1,55,68
Retail Trade	105	21,43
Agriculture	3	96
Small business	24	59
Professionla and self-employed	30	1,29
Education	6	47
Exports	71	1,16,55

The type-wise deposits of all the Bombay branches of the bank are shown in the following statement :—

As on	No of branches	Deposits (Rs in thousand)				Advances (Rs. in thousands)	Bills(Rs. in thousands)
		Demand	Savings	Time	Total
29th December 1967	16	10,47,41	3,53,09	13,37,35	27,37,85	17,07,94	5,21,86
31st December 1971	21	13,44,32	6,33,38	19,15,84	38,93,54	26,24,28	6,01,04

(3) Central Bank of India : The bank had opened 57 branch offices in Greater Bombay upto 1972, of which only 52 offices transacted banking business.

In 1968, all the branches together excluding ten branches had the total deposits of Rs. 35,87,60,000 and the number of accounts in all types of deposits stood at 1,49,849. The amount of total deposits alongwith the number of accounts in Bombay branches increased considerably in 1972 and the same stood at Rs. 89,28,49,000 and 3,05,816 accounts, respectively. This statistics reveals the progress achieved by the branch offices in Bombay.

Table No. 5 reveals the ownership of deposits of the branch offices of the bank in Greater Bombay as in 1972.

TABLE NO.5
OWNERSHIP OF DEPOSIT, CENTRAL BANK OF INDIA, BOMBAY BRANCHES 1972

(Rs. in 000')

	Fixed Deposits		Current Accounts		Saving Deposits		Other Deposits		Total Deposits
Total Deposits	No. of Accounts	Amount	No. of Accounts	Amount	No. of Accounts	Amount	No. of Accounts	Amount	No. of Accounts	Amount
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)	(11)
Manufacturing concerns	103	2,68,12	1,094	78,51			1	50,00	1,198	3,96,63
Trading concerns	295	57,12	12,501	8,82,57	38	3,02	3	1,13	12,837	9,43,84
Personal	50,425	30,16,50	5,141	2,45,00	214,474	27,79,70	6,442	1,03,82	276,482	61,45,02
Banking companies	1	4,00	15	3,95					16	7,95
Business	172	52,25	4,593	44,5,32	17	32	24	1,40	4,806	4,99,29
Public institutions and trusts	402	3,03,70	326	42,91	229	17,30	25	13,80	982	3,77,71
Others	3,660	2,26,03	3,487	2,34,45	1,836	39,68	512	57,89	9,495	5,58,05
Total	55,058	39,27,72	27,157	19,32,71	216,594	28,40,02	7,007	2,28,04	3,05,816	89,28,49

The following statement analyses the advances of the bank according to purpose in Greater Bombay in 1968 and 1972 (The statistics for the years 1968 and 1972 exclude the advances of eleven and two branches, respectively as the same is not available with the Head Office of the Bank):—

 

	1968		1972
Purpose	No of accounts	Amount (Rs. in '000)	No of accounts	Amount (Rs.in '000)
1	2	3	4	5
Industry	103	1,39,09	669	9,68,42
Commerce	164	52,86	437	1,49,25
Agriculture			27	13,88
Personal and professional	298	28,02	1,000	70,79
All others	684	1,82,46	2,340	4,87,15
Total	1,249	4,02,43	4,473	16,89,49

The advances of the bank in Greater Bombay also revealed an increa­sing trend as the same increased from about Rs. 4,43 lakhs in 1968 to Rs. 16,72 lakhs in 1972.

The advances of the branches in Greater Bombay according to security are shown in the following statement :—

(Rs. in thousands)

Security	1968	1972
Food articles	12,00	20,52
Industrial raw materials	50,09	3,88,80
Plantation products		98
Manufacture and minerals	1,42,14	5,98,11
Other securities	2,38,48	6,64,03
Total secured advances	4,42,71	16,72,44

(4) Bank of India : The Bank of India was incorporated in September 1906 in Bombay under Act VI of 1882 with subscribed capital of Rs. 100 lakhs divided into one lakh shares of the face value of Rs. 100 each and the paid-up value of Rs. 50 each.

Of this, 55,000 shares were privately applied for and the remaining shares were offered for public subscription. A sum of Rs. 10 per share was payable on application, Rs. 15 per share on allotment and Rs. 25 per share two months thereafter. The National Bank of India Limited was the banker to the issue.

The bank started its business on 1st November 1906 in Bombay and by the end of the year, the working funds amounted to Rs. 70 lakhs. Even though, in the early stages the bank followed a conservative policy with regard to its operations, it was justified in view of the banking crisis of 1913. The bank overcame all the difficulties through careful manage­ment of its funds, especially by maintaining adequate liquidity. The steady increase in the business of the bank during the first decade called for a strengthening of its capital structure.

The bank adopted changes in the memorandum and articles enabling the bank to raise the authorised capital from Rs. 1,00 lakhs to Rs. 2,00 lakhs by the creation of one lakh shares of Rs. 100 each. The shares were issued for Rs. 50 lakhs atRs. 50 paid-up value and the premium of Rs. 50 per share went to strengthen the reserve fund.

In 1920, the bank opened its first branch in Ahmedabad. In 1921, the bank was invited to manage the clearing house of the Bombay Stock Exchange. In 1927, the bank opened its branch at Bullion Exchange and soon after it took over the management of the clearing house of Bombay Bullion Exchange and the same is still continued.

The Great Depression of 1930 and the subsequent fall in the prices of agricultural commodities, such as, of oilseeds, cotton and raw jute affected the business of the bank adversely. It became difficult for the bank to recover several of its advances and interest rates began to soar. Besides, the book value of its investments also came down heavily. However, the bank emerged from the Depression with added strength, and during the decade 1929-39, the advances of the bank increased as also the working funds. The profits of the bank increased from Rs. 18.72 lakhs to Rs. 21.70 lakhs during the same period. During the decade 1929-39, the bank opened 12 new branches of which seven were in Bombay.

The Second World War created many acute problems for the bank. The initial reverses for the allies resulted in heavy withdrawal of funds from the bank, but thereafter the large defence expenditure incurred by the Government brought substantial increase in the deposits. After the War, the bank began to expand its activities abroad and opened its first foreign office in London in 1946. The post-war years marked the expansion of the bank's branches and operations in foreign countries.

In 1951, the paid-up capital of the bank was further increased by Rs. 50 lakhs and a premium of Rs. 50 lakhs was realised by the issue of shares.

The bank in 1968 set up specialised cells to deal with financing of agriculture, small-scale industries and other priority sector activities. Besides, the bank has also set-up a residential training college at Andheri to provide training to its staff.

Soon after the nationalisation of the bank in July 1969, the Bank of India Limited, became the Bank of India and the chairman was appointed as the custodian of the bank. The policies of the bank were progressively re-oriented to serve large national objectives.

Upto 1975, the bank had opened 66 offices in Greater Bombay, of which 64 were engaged in transacting banking business and 36 were equipped with the safe deposit vaults.

(5) Canara Bank : The Canara Bank was originally established in 1906 as the Canara Hindu Permanent Fund Limited which later became Canara Bank. The first branch of the Bank was started in Greater Bombay in 1928 and the same was located in Fort area. Upto 1971 the bank opened 40 branches in Bombay.

The various types of deposits increased tremendously from 1967 to 1971 as also the number of accounts in the Bombay branches of the bank. The same are given in the following statement :—

(Rs. in thousands)

As on the last Friday of December	Fixed Deposits		Current Account		Savings Deposits		Other Deposits
	No. of accounts	Amount Rs.	No. of     accounts	Amount Rs.	No. of     accounts	Amount Rs.	No. of accounts	Amount Rs.
1967	22,127	14,57,77	12,109	9,58,84	1,07,239	9,46,05	8,178	1,45,29
1969	20,368	19,10,65	14,324	8,49,39	1,31,287	11,61,85	13,954	60,56
1971	28,308	39,29,72	19,272	14,19,67	2,11,671	19,50,33	20,447	91,50

On the last day of March 1967, the overdrafts and cash credits of the branches in Greater Bombay amounted to Rs. 23.24 crores and the same increased to Rs. 34.67 crores on the same day of March 1971. The following statement further throws sufficient light on the growth of business of the bank in Greater Bombay.

As on the last Day of March	Advances including bills purchased and discounted to				Bills purchased and discounted (Amount) (Rs in thousands)
	Industry		Trade
	No of accounts	Amount (Rs. thousands)	No of accounts	Amount (Rs. thousands)
1967	977	13,98,75	2,067	7,52,51	15,25,32
1969	948	17,65,11	1,648	6,17,50	19,26,36
1971	2,166	25,29,66	1,677	8,99,03	31,45,20

(6) Syndicate Bank : The Syndicate Bank was established in 1925 at Udipi. Its first branch in Greater Bombay was started in 1937. Upto December 1975 the Syndicate Bank had opened 31 branch offices in Greater Bombay, of which only 28 were engaged in the banking transac­tions and the remaining were administrative offices. The registered office of the bank is now situated at Manipal in Karnatak State. The particulars of advances to the priority sectors by the branches in Greater Bombay as on the last Friday of February 1972 are given below :—

Name of priority sector	AS on last Friday of 1972
	No of Accounts	Amount (Rs. in thousands)
Road transport operators	154	16,84
Small scale industries	734	2,01,24
Retail trade	322	22,13
Agriculture (direct)	60	29,26
Small business	67	4,42
Professional	280	15,67
Educational	100	5,28
Exports	350	4,81,71
Total of all sectors	2,067	7,76,55

During December 1967 to December 1971, the deposits of the branches in Greater Bombay increased from Rs. 9 crores to about Rs. 30 crores and the amount of advances rose from Rs. 6 crores to Rs. 24 crores.

(7) Union Bank of India : The Bank was founded in the year 1919 and was incorporated on 11th November 1919 as a limited company.

The branch expansion of the bank in Greater Bombay is shown below:—

As on the last Friday of	Number of branches
December 1968	37
December 1969	42
December 1970	44
December 1971	46
December 1975	56

All types of deposits of the bank increased from Rs. 29 crores in 1966 to about Rs. 44 crores in 1971.

(8) Bank of Baroda : The first Bombay branch of the bank was opened on Apollo Street in 1919. In April 1961, the New Citizen Bank was amal­gamated with the Bank and as a result, seven branches of the New Citizen Bank were declared as the branches of the Bank of Baroda. Upto 1970, including these seven branches, there were, in all 43 branches of the bank in Greater Bombay.

The following statement gives the ownership of deposits of its branches in Greater Bombay as existed in 1969 :—

(Rs. in thousands)

Type of deposit	No. of Accounts	Deposits (Rs.)
Fixed deposits	30,894	4,09,737
Current account deposits	20,849	1,75,656
Savings deposits	14,632	1,86,397
Other deposits	7,747	23,618
Total	74,122	7,95,408

The data for the years 1967 and 1969 further reveals the fact that the amount of advances according to purpose increased from Rs. 83 crores to about Rs. 97 crores as shown in the following statement :—

(Rs. in thousands)

Purpose	Year ended 1967		Year ended 1967
	No.of accounts	Advances (Rs.)	No.of accounts	Advances (Rs.)
Industry	596	7,01,483	1,276	7,91,909
Commerce	592	72,357	1,133	90,242
Agricluture	1	1,871	10	987
Personal and Professional	1,139	28,422	3,032	42,285
All others	273	28,746	582	53,355
Total	2,601	8,32,879	6,033	9,78,778

The highest amount of advances was provided for the purpose of commerce and the smallest amount was granted for agriculture.

As regards the amount of advances according to security, the highest amount was recorded against the security of industrial raw materials and the same amounted to Rs. 695 lakhs in 1967 and Rs. 721 lakhs in 1969. However, the total secured advances of all the branches of the bank in Greater Bombay rose from Rs. 73 crores in 1967 to Rs. 78 crores in 1969.

(9) Indian Bank : The first branch of the Indian Bank was established in the Fort area as early as in 1936, but it took about 15 years to start its second branch at Mandvi. On the last Friday of December 1972, there were in all 15 branches of the bank in Bombay city. The number of branches, however, rose to 19 in December 1974. All these branches were equipped with safe deposit vault facility.

The deposits and advances of these branches are noted in the following statement:—

(Rs. in lakhs to decimal point)

As on the last Friday of	No. of branches	Deposits (Rs.)	Advances (Rs.)
December 1972	15	1,821.60	896.76
December 1973	18	2,278.74	1,109.15
December 1974	19	2,769.30	1,378.18

(10) State Bank of India : The origin of the State Bank of India goes back to the first decade of the Nineteenth Century, when the Bank of Bengal, the first of the three Presidency banks was established in 1806 and received its charter in 1809. The other two Presidency banks were the Bank of Bombay (1840) and the Bank of Madras (1842). The Imperial Bank of India was established in 1921 by amalgamation of the three Presidency Banks. Until 1935 i.e., till the establishment of the Reserve Bank of India, the Imperial Bank of India acted as the sole banker to the Government. After the establishment of the Reserve Bank of India in 1935 the Imperial Bank ceased to function as banker to the Government. As the commercial banks including the Imperial Bank of India were prospering only in the urban sector, the All India Rural Credit Survey Committee recommended the creation of the State Bank of India by taking over effective control from the Imperial Bank of India.

The State Bank of India was accordingly constituted on 1st July 1955 as successor to the Imperial Bank of India under the State Bank of India Act, 1955. Latter, the State Bank of India (Subsidiary Banks) Act was passed in 1959 enabling the State Bank to take over eight former State associated banks as its subsidiaries. As a result of the merger of two of the subsidiaries, there are now seven subsidiaries, viz. (i) State Bank of Bikaner and Jaipur, (ii) State Bank of Hyderabad, (iii) State Bank of Indore, (iv) State Bank of Mysore, (v) State Bank of Patiala, (vi) State Bank of Saurashtra, and (vii) State Bank of Travancore.

Alike its predecessors, the State Bank of India along with some of its subsidiaries, conducts Government banking business as the agent of the Reserve Bank of India at centres where the latter does not have an office or branch of its banking department. Further, it also maintains currency chests and small coin depots at various centres all over the country ensuring adequate and continued circulation of currency notes amongst the public and withdrawing the used and soiled currency notes from circulation.

The bank is a major customer in the giltedged market. In addition to its scheme of financing of agriculture, the activities of the bank include financing of small-scale industries and small business, and foreign exchange business. In fact in 1950, the bank formulated a liberalised scheme of financing small scale industries and is continually responding to the growing needs of this sector by providing increasing credit facilities on liberal terms and under simplified procedures. The bank's role in the field of export promotion is not confined to export financing alone but extends to exploring and developing new markets for Indian exports.

The first branch of the bank other than the main branch was established, at Girgaum in 1916, and the number of branches in Greater Bombay upto September 1974, increased to 50. Of these, only six branches did not provide the safe deposit locker facility.

Various schemes initiated by the bank include issuing of gift cheques, traveller's cheques, recurring deposits, premium prize deposit certificates, etc.

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RESERVE BANK OF INDIA

History : The Reserve Bank of India was established on April 1, 1935 as per the Reserve Bank of India Act, 1934.

Its predecessor, the Imperial Bank of India performed certain central banking functions such as a banker to Government and a banker's bank to some extent. However, the regulation of note issue and management of foreign exchange continued to be the direct responsibility of the Central Government.( For details refer to Reserve Bank of India, Functions and Working, 1983, published by the Reserve Bank of India.) In 1926, the Hilton Young Commission recommended that the dichotomy of functions and division of responsibility for control of currency and credit should be ended. The Commission suggested the establishment of a Central Bank, to be callSd the' Reserve Bank of India', independently of the Imperial Bank whose separate continuance was considered necessary for enlargement of banking facilities in the country. The Gold Standard and Reserve Bank of India Bill to give effect to this recommendation was introduced in the Legislative Assembly in January 1927, but was dropped on account of sharp differences of opinion. The Indian Central Banking Enquiry Committee (1931) however, strongly recommended the establishment of the Reserve Bank at the earliest. The question again assumed importance during the process of constitutional reforms in India. Ultimately a fresh bill was introduced into the Indian Assembly on 8th September 1933 which was passed on 22nd December 1933. It received the Governor General's assent on 6th March 1934. After some preliminaries, the Bank was inaugurated on April 1, 1935.

The Bank was originally constituted on the pattern of leading central banks in Western countries. Its share capital was Rs. 5 crores, divided into five lakhs fully paid-up shares of Rs. 100 each. Since then there has been no change in the capital of the Bank.

From January 1, 1949, the Reserve Bank entered upon its career as a State-owned undertaking. The Act of 1948 empowered the Central Government to issue such directions to the Bank as it might, after consultation with the Governor of the Bank, consider necessary in public interest.

Functions : The main functions of the Reserve Bank are broadly the same as those of central banks in other countries. It has the sole right to issue notes, and it acts as a bankers' bank, holding custody of their cash reserves and granting them accommodation in a discretionary way. The Bank possesses not only the usual instruments of general credit control such as the Bank Rate, open market operations and the power to vary the reserves requirements of banks, but also extensive powers of selective and direct credit regulation. The power of moral suasion is also employed in a comprehensive manner. Another, important function of the Bank is to conduct operations of Government, and to advise it on economic matters in general and on financial problems in particular. The Bank has also an important roleto play in the maintenance of the exchange value of the rupee. It acts as the agent of the Government in respect of India's membership of the International Monetary Fund. It exercises conttol over payments for and receipts from international trade and other kinds of foreign exchange transactions in the national interest.

The Reserve Bank of India grants financial accommodation to the co-operative banking sector (besides the scheduled banks) for financing agricultural operations and marketing. It set up the Agricultural Credit Department for this purpose.

The nationalisation of 14 major Indian scheduled commercial banks on July 19, 1969 was an important landmark in the history of Indian Banking. The immediate task set for the nationalised banks was mobilisation of deposits on a massive scale and lending of funds for all productive activities, particularly to the weaker sectors of the economy. On April 15, 1980, six more private sector banks were nationalised, extending further the area of public control over the country's banking system. As a result of nationalisation, the Bank has been successful in attaining the goals of promotion of monetisation and monetary integration of the economy, filling in the gaps in financial infrastructure, meeting the credit needs of the economy subject to the requirements of sectoral allocation, and above all in rendering support to the planning authority in productive deployment of investible funds so as to maximise growth with stability and social justice.

Organisation: The general superintendence and direction of the Bank's affairs is vested in the Central Board of Directors with headquarters at Bombay. As the Chairman of the Central Board of Directors, the Governor is the Bank's chief executive authority who is assisted by the Deputy Governor. There are four Local Boards with headquarters in Bombay, Calcutta, Madras and New Delhi.

The primary functions of the Bank regarding note issue and general banking business are exercised through two separate departments, viz., the Issue and the Banking Departments. These departments constitute, what are known as the ' Local' offices (In the Reserve Bank of India Act, a distinction is made between the terms ' office 'and ' branch', of the Bank. The Local Boards in Bombay, Calcutta, Madras and New Delhi are designated as offices, while those in the other centres are termed as branches.) branches of the Bank, and in Bombay they are located in the Fort area and Byculla, respectively, besides at many other places in India. Formulation of policies concerning monetary management, supervision of banks, extension of banking credit facilities, exchange control, management of foreign exchange reserves and rendering of advice to Government on economic and finan­cial matters are mainly done at the headquarters (central office) of the Bank in Bombay. The headquarters of the Department of non-banking companies is located in Calcutta.

The Central Office has many departments which are mentioned below :—

1.Secretary's Department.
2. Department of Banking Operations and Development.
3. Industrial Credit Department.
4. Agricultural Credit Department. (These departments were closed as the bulk of their functions were taken over by
the National Bank for Agricultural and Rural Development from July 12, 1982.)
5. Rural Planning and Credit Cell.
6. Rural Planning and Credit Department. (It was created on July 12, 1982 to perform certain functions relating to rural credit.)
7. Exchange Control Department.
8. Department of Currency Management.
9. Department of Expenditure and Budgetory Control.
10. Department of Government and Bank Accounts.
11. Department of Non-Banking Companies (Regional Office).
12. Department of Economic Analysis and Policy.
13. Department of Statistical Analysis and Computer Services.
14 Credit Planning Cell.
15. Department of Administration.
16. Personnel Policy Department.
17. Management Services Department.
18. Legal Department.
19. Inspection Department.
20. Premises Department.

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URBAN CO-OPERATIVE BANKS

An urban co-operative bank supplies short-term and medium-term credit to its members. The area of operation of such a bank is restricted to a district or a town or a part of the town, or even a factory or a department. Membership is open to all persons residing within the area of operation and the liability of members is limited. However, only with the prior permission of either the Registrar or Assistant Registrar of Co-operative Societies, a person can become a member of more than one bank. Capital is raised by issuing shares, accepting deposits on current, savings and fixed deposit accounts and by borrowing from the central financing agency.

The loans advanced by the bank are on personal security, on mortgage of property or on security of valuables pledged or produce hypothecated. Cash credits are allowed and overdrafts are sanctioned on any of the securities. It carries banking operations like issue of hundis and drafts and collection of cheques, hundis, drafts, etc.

The year 1906 recorded the registration of first co-operative Bank in Bombay viz., the Shamrao Vithal Co-operative Bank. The Bank was mainly established to help the people by way of credit to the needy members of Saraswat community. During 1970-71, there were 69 co-operative banks in Bombay. The number increased to 83 during 1975-76.

The urban co-operative banks are of two categories, viz., (i) Primary Urban Co-operative Banks, and (ii) Salary Earners' Co-operative Banks. There were 75 primary urban co-operative banks in Greater Bombay on 31st December 1977; of which 4 were under liquidation. Besides, there were eleven salary earners' co-operative banks in Greater Bombay. These banks catered to the credit required by their members for consumption purposes.

The following statement shows the number of primary urban co-operative banks (Registrar of Co-operative Societies, Bombay) in Greater Bombay along with their different types of deposits as on 31st December 1977 :—

No. of primary urban co-opera­tive banks	Total no. of branches excluding their Head offices	Deposits
		Total	Current	Savings	Fixed	Others
71	97	10,75,179	1,39,641	4,31,669	4,48,421	55,448

The classification of loans and advances by the primary urban co-operative banks reveals that the loans and advances are given for various purposes such as :—

1. small scale industries ;
2. small traders, small shopkeepers and small businessmen for trade and commerce ;
3. transport operators ;
4. education ;
5. construction and/or repairs to house property, dwelling houses etc ;
6. repayment prior to debt ;
7. consumption purposes ; and
8. others.

The rate of interest charged by every co-operative bank varies according to the purpose and also according to the term of repayment i.e. short-term and medium-term.

The following statement reveals the number of salary earners' co­operative banks in Greater Bombay alongwith their branches and deposit mobilisation :—

(Rs. in thousands)

No. of salary operative banks	Deposits as on 31st December 1977
	Total	Savings	Current	Fixed	Others
17	1,58,298	48,668	2,218	1,01,360	6,052

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FOREIGN EXCHANGE BANKS

Historical Background : The foreign exchange bank is defined as the bank whose head office is outside India. Though there is no rigid differentiation between foreign exchange banks and other Indian Commercial Banks, the basic point of distinction is that they invest a considerable portion of their funds during the busy season in discounting foreign trade bills. The financing of foreign trade in India is largely handled by them.

Most of these exchange banks were established during the latter part of the 19th century and the earlier part of the present century. The extension of the external trade and absence of a well-developed modern banking structure were responsible for the expansion of the foreign exchange banks. A list of foreign exchange banks which had established their branches in Bombay upto 1925 is given below :—

	Name of bank	Head office	Year of establishment of Agency or branch of the Bank in Bombay
(1)	Yokohama Specie Bank Ltd.	Yokohama	1894
(2)	Netherlands India Commercial Bank.	Holland	1920
(3)	Hong  Kong  and Shanghai Banking Corporation(The business of Hong Kong and Shanghai Banking Corporation was transferred to the Mercantile Bank Ltd., on 1st October 1972.)	Hong Kong	1869
(4)	Chartered  Bank  of  India, Australia and China.	London	1858
(5)	National Bank of India Ltd.	London	1863
(6)	Mercantile Bank of India Ltd.	London	1854
(7)	Bank of Taiwan	Taipeh (Formosa)	1917
(8)	Sumitono Bank	Japan	1916
(9)	Mitsui Bank	Tokyo	1924
(10)	The International Banking Corporation (absorbed by the National City  Bank of New York).	New York	1904
(11)	Netherland Trading Society	Holland	1920
(12)	National Vetrumariuo	Lisbon	N.A.
(13)	The Eastern Bank of India ..	London	1910

Foreign firms such as Thomas Cooks and Sons and Grindlays and Company also conducted a substantial amount of foreign exchange business though they were mainly trading and tourist agencies.

The number of foreign exchange banks in 1870 was only three and by 1919-21 they were 19. They had a lucrative business in India by that time, bothin relation to the financing of foreign trade as well as internal activities. They financed the foreign trade by issuing and purchasing the trade bills known as D.P. (documents on payment) and D. A. (documents on acceptance) bills. As the exchange rates between the Rupee and the Sterling fluctuated from time to time, there was risk involved in this business. But the exchange banks by the first quarter of the present century had established their position and prestige; and due to the large volume of their business, were able to withstand the risks. Of course, the forward exchange market provided the necessary support.

There were a number of criticisms levelled against these foreign banks which were visible in the evidence of the Indian members before the Babington Smith Committee and in the minority report of the Hilton Young Commission. The issuing of council bills and reverse council bills by the Government of India for supporting the exchange value of the Rupee was considered to provide a special help to the exchange banks. Even Sir Stanchy Reed stated before the Hilton Young Commission, "I hold the view rightly or wrongly that this practice of spoon-feeding the exchange banks has been demoralising to the exchange banks". The exchange banks, further invested their funds largely on the London money market and this deprived the Indian money market of the opportunity to develop further. They always protested against the proposal of allowing the presidency banks to participate in foreign exchange business or gain access to the London money market. They were against even the starting of the central bank for the development of the Indian money market. These points of complaint were less relevant by 1939, when already the Reserve Bank of India was established and the rate of exchange between the Rupee and the Sterling was fixed at the level of Rs. 1 = 1 s. 6 d.

Yet the Indian banks and Indian interests continued their criticism against the foreign exchange banks. The main two points were, firstly, the monopolistic position of these banks, and secondly, the discriminatory policies adopted by them. The Indian commercial banks, with their limited skill and resources were not able to compete with the powerful foreign banks and thus could not participate in financing of the foreign trade. The foreign banks also discriminated against Indian interests. They employed for the high position mostly their own nationals. They favoured their own shipping and insurance firms. Even the exports and imports of the country were largely carried out by the foreign firms, mainly British.

While the foreign exchange banks substantially helped the expansion of the foreign trade and bore the risk of fluctuating exchange rates; they were also able to earn good profits in their business in India. There were no restrictions or regulation or these banks till 1949, though the Indian commercial banks were regulated by the Indian Companies Act. There was always the demand from Indian banks for the control of foreign banks but no such legislation was enacted till after Independence.

The Second World War (1939-45) led to the imposition of foreign exchange controls by the Reserve Bank of India. Under the controls, exchange transactions could only be carried out by the authorised agents approved by the Reserve Bank of India and it acquired the powers of asking for information from the exchange banks about their transactions relating to India and the other countries with which the Indian branches of the exchange banks had their dealings. The rates of exchange between the Rupee and these currencies were fixed by Reserve Bank of India and the policies regarding these transactions were laid down by the Reserve Bank of India. The Reserve Bank of India acquired the surplus exchange resources arising from the export surplus of the country during the war period and a part of this was used for the repatriation of the foreign debt of the country. As a result of all these developments during the war period, Reserve Bank of India and the exchange banks came in contact with one another and a co-operative attitude developed between them. The Reserve Bank of India acquired more powers under the Indian Banking Companies Act of 1949, and under the Act, certain regulations were imposed on the functioning of the exchange banks.

Reserve Bank of India has the powers to impose strict regulations on the exchange banks if necessary and thus the foreign exchange banks are on par with the other Indian banks in the country.

Since Independence, the Indian banks have been extending their activities and have opened branches in various countries. By 1960, there were as many as 100 offices of Indian banks in foreign countries, though majority of them were in Pakistan. The main obstacle in the way of Indian banks taking up banking business in foreign countries has been the difficulty of opening branches and working them successfully. There are political and currency complications. A branch in a foreign country needs huge capital, great experience and prestige to attract funds. Yet the Indian banks are venturing abroad in various countries. Still they have not got a sufficient share in the financing of foreign trade, and the foreign exchange banks have the major share, in financing the foreign trade of the country.

With the changing structure and functions of the Indian commercial banks and the economic development of the country, certain trends are evident in the working of the foreign exchange banks. Their share in the financing of internal trade is very insignificant today. This can be accounted for by two factors. The volume of imports and exports of the country has increased at a very rapid rate, and though the Indian commercial banks are slowly extending their share in this field, the volume of business of exchange banks is large and increasing. The rates of exchange are now maintained at a fixed level and can be changed by the Government only after the approval of the International Monetary Fund. Thus the risks in financing of external trade are very low and the profits of the exchange banks are high. The tourist trade is expanding which again expands the transactions of the exchange banks.

Since 1950, and more so after 1956, a large number of collaboration agreements have been undertaken in the industrial sector, between the Indian and the foreign firms. These collaborating firms, would naturally bank with the banks of their own nation and thus have their accounts with these banks. They would also draw credit from these exchange banks and thus the business of the foreign exchange banks continued to expand. The credit controls are not all directly applicable to the foreign exchange banks, and as these banks are mostly concerned with those sectors which are accepted as the priority ones by the plans, the financial activities of the exchange banks have continued to expand. Their functioning is largely confined to, these definite sectors, and as with the other financial institutions, their business is also continually expanding.

The list of Foreign Exchange Banks functioning in Greater Bombay in 1980 (Directory of Bank Offices, December 1980, Reserve Bank of India) is given below:—

Foreign Exchange Bank		No. of Branch offices/ Administrative offices/ sub-offices
1.	American Express  International Banking Corporation.	Local Head Office.
2.	Bank of Oman	1 branch.
3.	Bank of Tokyo	1 branch.
4.	Banque National de Paris	2 branches.
5.	British Bank of the Middle East ..	1 branch.
6.	Chartered Bank	1 branch, 5 sub-branches. 1 administrative office.
7.	European Asian Bank	1 branch.
8.	Mercantile Bank	1 branch, 6 sub-offices.
9.	Mitsui Bank	1 branch.
10.	Nedungadi Bank	1 branch.

Information about some foreign exchange banks operating and having branches in the city of Bombay and their operations are described in the following paragraphs.

Mercantile Bank Limited (The name of the bank has been changed to Hong Kong and Shanghai Banking Corporation Since 1st January 1983) (Incorporated in England) : The Mercantile Bank Ltd. is one of the oldest British banks to have been established in the city of Bombay. It's first branch was established as early as in 1853 in the Fort area. It was mainly undertaking banking and exchange business of every description. Since then upto 1966, no new additional branch was opened, mainly for undertaking ordinary banking business. There were six branches of the bank in Greater Bombay in 1970 five of them being established since 1966. They were established as follows:—

(1) the branch at Tulsi Wadi, 1st March 1966, (2) the branch at Vile Parle (West), 14th October 1966, (3) the branch at Chembur, 15th March 1967, (4) the branch at Bandra, 28th August 1968, and (5) the branch at Andheri (East), 28th January 1969. As the separate information about the assets and liabilities of these branches in the city of Bombay is not available, an aggregate data of all the Indian branches of the bank is given.

The total liabilities and assets of the bank from 1967 to 1970 are given below:—

                                (Rs. in lakhs)                                           (Rs. in lakhs)

Year	Liabilities and Assets	Year	Liabilities and Assets
1967	43,29	1969	53,18
1968	55,23	1970	60,09

The entire business of the Hong Kong and Shanghai Banking Corporation in India was transferred to the Mercantile Bank Ltd. on 1st October 1972.

American Express International Banking Corporation : The date of establishment of the branch in Bombay is June 1, 1922. The nature of transactions as reported by the bank is ordinary banking business, discounting of foreign and indigenous bills, etc.

National and Grindlays Bank Limited : The first branch of the bank was established in Bombay in 1865 and upto the year 1972, the number of branches in Greater Bombay increased to 11.

Under the advances of the bank, Rs. 2,95 lakhs and Rs. 8 lakhs relate to the medium-term advances for which finance has been obtained, respectively from Industrial Development Bank of India and Agricultural Refinance Corporation.
                                (Rs. in lakhs)                                                       (Rs. in lakhs)

Year	Liabilities and assets (As on 31st December)	Year	Liabilities and assets (As on 31 st December)
1966	2,43,55	1969	2,79,27
1967	2,54,55	1970	3,55,59
1968	2,71,31

The data given in the following statement indicate the pattern of the advances by the Bombay branches of the Bank.
                                                                                                            (Rs. in'000)

Sector	1967		1969
	No.of Accounts	Amount Rs.	No.of Accounts	Amount Rs.
Industry	225	22,35,58	267	27,57,20
Commerce	393	12,59,58	485	1,64,600
Agriculture	4	1,75	2	4,39
Personal and professional	463	22,03	509	17,48
All others	135	2,17,74	143	1,97,74
Total	12,20	37,36,68	14,06	46,22,81

The bank's advances in Greater Bombay as above reflect not merely the policy of the Bank in relation to these advances but also the industrialised nature of the city. By 1969, as regards the number of accounts, the largest was under personal and professional viz; 509, but the amount of advances to industry was the highest which stood at Rs. 27.57 crores (accounts 267) in 1969; and to commerce at Rs. 16.46 crores (accounts 485). The advances to personal and professional sector were hardly Rs. 17 lakhs. As agriculture plays a very small role in the city, the number of accounts were only two and the advances under it amounted to about Rs. 4 lakhs. The commerce and industry which form the basic sectors in the city, account for the major part of the advances of the bank. The data reflect the fact that the largest amount of transactions were in terms of Sterling and U.S. Dollar. In 1971, the purchase and sale of Sterling were Rs. 102 lakhs and Rs. 164 lakhs, respectively and purchase and sale of U.S. Dollar were Rs. 110 lakhs and Rs. 58 lakhs, respectively. The transactions in other currencies viz. Canadian or Australian were relatively very small. The amount of deposits of the branches in Greater Bombay increased from Rs. 43,40 lakhs in 1967 to Rs. 61,45 lakhs in 1971 and the number of deposit accounts increased from 80,144 to 1,04,763 over the same period. Similarly, their business in relation to advances of loans to indigenous and foreign trade continually expanded over this period.

The largest number of accounts and the amount there under in the branches of the bank in Greater Bombay are under personal accounts. Out of 95,524 total number of accounts in March 1970, the total number of personal accounts stood at 87,910; whereas, the number of accounts in trading concerns stood at 3,965;and manufacturing, at 799. The amount outstanding on 31st March 1970 on personal account was Rs. 27,31 lakhs; while under manufacturing it was Rs. 4,78 lakhs. A large amount of personal deposits were in the fixed deposits and the savings accounts; while for the manufacturing and trading concerns, they were largely in savings and current accounts.

The first branch of the bank was established in the Fort area in 1865. Upto December 1975, the number of branches of the bank increased to 11. They are situated at Mandvi, Cumballa hill, Dadar, Byculla, Ghatkopar, Santacruz, Vile Parle, etc. These branches carry out all types of banking business, while the branches at Cumballa Hill, Dadar, Santacruz and Vile Parle, provide safe deposit locker facilities.

Mitsui Bank Limited {Incorporated in Japan with Limited Liability) : The bank has one branch office in India which was established on 28th May 1955 in Bombay. The bank is a scheduled ' A' class bank doing ordinary banking business such as deposits, foreign exchange, loans, etc. The following statement gives the profit and loss account of Bombay branch for the year ended 31st December.

Year	Expenditure (Rs.)	Income (Rs.)
1967	28,99,528.95	28,99,528.95
1968	26,34,097.33	26,34,097.33
1969	23,27,163.12	23,27,163.12
1970	23,78,371.50	23,78,371.50

First National City Bank : (Incorporated with limited liability in the U.S.A. and established in 1812).—The First National City Bank has three branches in the city of Bombay. The first branch was established in January 1904. The bank is mainly concerned with banking business and foreign exchange business. It's rate of interest for loans varies from 9 to 10 1/2 per cent. The prime consideration in sanctioning loans is the credit worthiness of the client and the viability of the project. The state­ment given below about the ownership of deposits as on 31st July 1970 indicates that the number of personal accounts of the bank were the largest as the same stood at 12,052 on July 31,1970. The next in importance in the number of accounts were business accounts and trading companies. The deposits of manufacturing concerns were higher in relation to other deposits.

(Rs. in thousands)

Particulars	Fixed Deposits		Current Accounts		Saving  Deposits		Total Deposits
	No. of accounts	Amount	No. of accounts	Amount	No. of accounts	Amount	No. of accounts	Amount
	Rs.		Rs.		Rs.		Rs.
Manufacturing concerns.	47	41,992.18	325	37,309.29			372		79,301.47
Trading companies	31	948.36	463	9,473.35			494		10,421.71
Personal	1,233	9,319.69	449	2,418.20	10,380	20,255.53	12,062		31,993.42
Banking companies	.....	....	13	1,115.49			13		1,115.49
Business	19	18,735.78	77	10,813.35			96		29,549.13
Public institutions and trusts.	38	4,084.79	37	4,187.64	28	293.93	103		8,566.36
Others	48	2,40,378.17	28	1,083.92			76		2,41,462.90
Total	1,416	3,15,458.97	1,392	66,401.24	10,408	20,549.46	13,216		4,02,409.67

As regards the advances of the Bank, the largest amount was to industry, accounting for Rs. 207,594.23 thousands by August 7, 1970. The total advances on that date were Rs. 217,478.95 thousands and the number of total accounts stood at 764.

The data on advances according to securities in Greater Bombay indicates that all the advances were on the security of industrial raw materials and the same amounted to Rs. 154,294.60 thousands. The business of the Bank which was confined to the city of Bombay reflected two features. Firstly, a large number of accounts and transactions were in the category of personal transactions and they could be mostly in relation to the American citizens residing in the city. Secondly, the amount of advances to industries by Bombay branches was the highest on 7th August 1970 and that again could be in relation to the American industrial and business firms in the city, and their operations in the country.

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STATE-AID TO INDUSTRIES

The main object of industrial policy is to bring about a balanced and a rapid development of the country's industrial resources. This cannot be achieved if things are left entirely in the hands of private enterprises, because the paucity of capital, the shortage of industrial and capital goods, the lack of technical skill and the desire to have quick and sure returns are the obstacles in the way of private entrepreneurs. The State therefore has got an important role to play on this behalf. Financial assistance for creation of fixed assets and working capital is one of the important factors for the promotion of industries. The same is made available through the following institutions :—

	Source	Financial Assistance
(1)	Directorate of Industries under the State-Aid to Industries Act, 1960.	Working capital  and  fixed assets.
(2)	Maharashtra State Financial Corporation.	Working  capital  and  fixed assets.
(3)	State  Bank of India,  Commercial banks under the Reserve Bank of India guarantee scheme.	Working capital.
(4)	State Industrial and Investment Corporation of Maharashtra (SICOM).	Share capital participation.
(5)	Maharashtra Small Scale Industries Development  Corporation Ltd., (MSSIDC).	Share capital participation.

Besides, large scale industrial units get financial assistance from the Industrial Development Bank and the Industrial Credit and Investment Corporation of India, The Directorate. of Industries, however, is not associated with any of the formalities for financing large scale industrial units through these two organisations. The Directorate of Industries renders financial assistance under the State-Aid to Industries Act, 1960 and furnishes technical scrutiny report in the case of applications consi­dered by the Maharashtra State Financial Corporation and the State Bank of India. The Directorate of Industries is indirectly associated with processing of applications of medium scale industries sponsored by the State Industrial and Investment Corporation of Maharashtra and small scale industries sponsored by the Maharashtra Small Scale Industries Development Corporation.

The rate of interest charged differs so as to give special treatment to small entrepreneurs and to those from the underdeveloped regions. This is one of the incentives offered by the State Government for dispersal of industrial growth and preventing over-concentration of industries in the Bombay-Thane industrial complex. The Deputy Director of Industries, Bombay region, operates the scheme for financing small and cottage indus­tries in Greater Bombay and grants loans upto Rs, 3,000. The details of loans granted under State-aid to Industries Rules, 1961, to the cottage and small scale industries in Greater Bombay area by different agencies are given in the following statement :—

	1967-68		1968-69		1969-70		1970-71
Name of Agency	Units	Amount (Rs.)	Unit	Amount (rs.)	Unit	Amount (Rs)	Unit	Amount (Rs)
Maharashtra  State Financial Corpora­tion.	14	6,62,000	9	4,81,000	14	5,63,000	..	7,63,657
Bank of Maharashtra	1	8,000	11	72,400	9	72,200	15	85,000
The Deputy Director of   Industries, Bombay,	20	28,300	26	35,750	14	20,000	15	24,000

The two important schemes implemented by the Directorate of Industries, Government of Maharashtra, Bombay, in the last few years are (i) Employment Promotion Programme, and (ii) Export Promotion, the details of which are given in the following few paras.

(i) Employment Promotion Programme : Under this programme, the scheme of seed money assistance to educated unemployed is implemented. During 1973-74, the Government of India launched a programme to assist the educated unemployed young men to be self-employed in small industries, service industries or business enterprises. The scheme is implemented by the Industries Commissioner through different develop­ment corporations within their jurisdiction. The main objective of the scheme is to encourage new types of small ventures including trading activities for full utilisation of locally available raw material, indigenously developed know-how, local skills and talents. However, as the class of entrepreneurs is being initiated for the first time to venture into small industrial or business enterprise, it may not be always possible to provide margin money for a bankable proposal. Usually, the financing institutions stipulate upto 30per cent of the total cost of the project, including working capital finance. The scheme for seed money assistance envisages filling up the gap of margin money to the extent of 10 per cent of the project cost and in very exceptional cases upto 15 per cent at a low rate of interest of 4 per cent per annum and a long moratorium for repayment.

Entrepreneurs are expected to seek financial assistance from the institutional sources, i.e., the nationalised banks, Maharashtra State Financial Corporation, etc. The main feature of the scheme apart from seed money assistance is to provide co-ordinated assistance by regional development corporations right from the stage of selection of the business or production opportunity upto the point the project goes into operations.

Assistance of seed money is available to proprietary units, partnership concerns, private limited companies or co-operative housing societies, with majority share holding by eligible persons without any further dilution of holding by those who do not belong to this category. In the case of manufacturing units, dilution of equity is permitted only if the educated unemployed are in majority.The equity held by them should at least be 76 per cent of the total equity, for getting an assistance of seed money. In such case, the seed money is sanctioned upto Rs. 30,000. Besides, all the educated unemployed partners are expected to take active part in the enterprise. Assistance of seed money is given only at the start of the project both for fixed and working capital as evaluated by the financing agency.

The repayment of loan given as seed money for fixed assets commences only after the entrepreneur's obligation has been fully met or after eight years, whichever is earlier. The repayment is generally spread over a period of four years after the period of moratorium. The first instalment commences six months after the expiry of moratorium comprising of the accumulated interest followed by equated six-monthly instalments of principal with interest. In Greater Bombay area, the scheme is implemented by the Industries Commissioner, Bombay, through the Maharashtra Small Scale Industries Development Corporation and the Khadi and Village Industries Board.

The assistance  for  self-employment  is  given  for  the following activities :—

1. Small industries and services institutes
2. Agro-service centres
3. ,Animal husbandry, dairy, poultry, piggery, fisheries, etc.
4. Retail shops for sales and services, especially those relating to goods coming under the public distribution system, organisation of co-operatives for marketing goods, agencies and services of hotels and motels, etc.
5. Transport, and
6. Medical practitioners at places with a population not exceeding 50,000.

The expenditure on this scheme in Greater Bombay since its inception was as under:—

Year	Units	Amount in lakhs (Rs.)
1972-73	5	0.13
1973-74	48	3.02
1974-75	29	3.08
1975-76	266	8.17
1976-77	108	3.00
Total	456	17.40

 (ii) Export Promotion Activities : An export promotion wing headed by the Director of Export Promotion, who is also the Member-secretary of the State Board for Export Promotion, has been constituted within the Directorate of Industries, to act as the secretariat cell of the Board, standing committee, and the seven commodity panels under the Board for export promotion and to perform all other executive functions relating to export promotion.

The Export Promotion Cell in the Directorate of Industries recommends deserving cases for preferential treatment to various organisations in the matter of procuring of land, water, power, raw materials, machinery, etc. It also makes arrangements to disseminate information to interested exporters and helps them in the display of their products in the selected international trade fairs and exhibitions. It also assigns to reputed concerns or organisations the work of conducting export potential surveys of selected products and commodities. Of late, in view of the tremendous potential, efforts are concentrated in the countries in the Middle East.

The export promotion wing in the Directorate makes special efforts to assist the exporters by taking up their genuine difficulties both with the State Government as also with the Central Government. This pertains to items like custom duty problems, refund of excise duty, exenijption from payment of octroi duties, etc.

Recommendations of the panels are screened by the committee of the Chairmen of the panels presided over by the Secretary of Industries, Energy and Labour Department, Government of Maharashtra, and important recommendations involving general issues and policies are placed before the Board for consideration. Actions or other recommen­dations of the panels, relatively less in importance and of an individual nature are initiated by the Export Promotion wing without reference to the Board.

Important recommendations of the Board involving major policy deci­sions on the part of the State Government are placed before the Industries sub-committee of the High Power Committee of the State Cabinet.

Besides the export promotional activities of the Directorate of Industries, the following State Government agencies in Bombay, are engaged in commercial exports of products coming under their respective purview:—

Agency	Products
MAFCO Limited	Frozen buffalo meat, fresh and frozen vegetables, bananas, mangoes, peas and fish.
Maharashtra Agro-Industries Development Corporation Limited.	Canned  and bottled  fruit juice, pulp and squashes.
Maharashtra Small  Scale Industries  Development Corporation Limited.	All items of small scale industries.
Maharashtra State Oil Seeds Commercial and Industrial Corporation Limited.	Cotton seed, cakes and extraction.
Maharashtra Fisheries Development Corporation Limited.	Frozen  sea  food,  prawns  and lobster tails in cans and frozen fish.
Maharashtra State Powerloom Corporation Limited.	Powerloom cloth.
Maharashtra State Textile  Corporation Limited.	Cotton textiles.
Maharashtra State Co-operative Marketing Federation Limited.	Cotton bales.
Development Corporation of Konkan Limited.	Mangoes.

A sum of Rs.5 lakhs was placed at the disposal of the Maharashtra Small Scale Industries Development Corporation Limited as agency of the State Government for solving the difficulties of warehousing faced by upcountry exporters. The Corporation has already constructed a warehouse at Sewri wherein an area of 929 square metres is earmarked for exporters. In addition, another warehouse in Cotton Green area admeasuring 6,967.72 sq. metres has been acquired by the Corporation from Bombay Port Trust and the warehouse would be available to exporters for storage and repacking. These facilities are proposed to be expanded in a phased programme depending on the demand and availability of funds.

As a measure of encouragement, the Government of Maharashtra annually distributes awards in the form of silver plaques to the best exporters. The scheme covers large scale, small scale entrepreneurs and merchants in the State.

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STATE-SPONSORED FINANCIAL INSTITUTIONS

Maharashtra State Financial Corporation : Various State Financial Corporations have been established in pursuance of the State Financial Corporations Act, 1951 for catering to the financial requirements of small and medium sized industries. The Maharashtra State Financial Corporation (MSFC) was established in 1953 as the then Bombay State Financial Corporation and was reconstituted under Section 70 of the Bombay Re-organisation Act, 1960. Accordingly, its name was changed to Maharashtra State Financial Corporation.

The Corporation considers applications for loans of Rs.10,000 to Rs. 10,00,000 from proprietary concerns, partnership concerns without minors and private limited companies. However, in the case of public limited companies and registered co-operative societies, the Corporation is empowered to consider applications upto Rs. 20 lakhs.

In order to assist particularly the small scale industries, the Maharashtra " State Government has entered into an agency-cum-guarantee agreement with the Corporation under which loans from Rs. 10,000 to Rs. 75,000 and in exceptional cases upto Rs. 1 lakh are granted by; the Corporation on liberalised terms. The Government also gives guarantee in each of these loans. Loans above Rs. 1 lakh are considered by the Corporation under its own rules.
A list of industrywise loan applications sanctioned by the Corporation during 1979-80 in Greater Bombay district is given below:—

Sr. No.	Type of Industry	Applications sanctioned
		No.	Amount (Rs. in lakhs)
1.	Mining and quarrying		....
2.	Food mfg. industry except beverages	1	29.30
3.	Mfg. of Textiles	15	57.91
4.	Mfg. of footwear and other wearing apparels and made up textile goods	2	2.34
5.	Mfg.  of wood and cork except mfg.  of furniture	2	0.86
6.	Mfg. of furniture and fixtures
7.	Mfg. of paper and paper products	3	3.33
8.	Printing, publishing and allied industries	13	35.04
9.	Mfg. of leather and leather products	2	5.88
10.	Mfg. of rubber products	1	3.18
11.	Mfg. of chemicals and chemical products	9	25.67
12.	Mfg. of products of petroleum and coal	1	20.00
13.	Mfg. of non-metallic mineral products	1	5.50
14.	Basic metal industries	3	26.37
15.	Mfg. of metal products except machinery and transport equipment	20	53.70
16.	Mfg. of machinery except electrical machinery	7	26.32
17.	Mfg. of electrical machinery, apparatus and appliances	5	17.97
18.	Mfg. of transport equipment		....
19.	Miscellaneous mfg. industries	16	70.35
20.	Electricity, gas, steam and sanitary services
21.	Hotel Industry	6	31.45
22.	Transport industry
	(a) Road transport	13	5.90
	(b) Water transport	2	0.64
23.	Beverages industry	....	....
24.	Industrial estates	....	....
25.	Motion picture and distribution	....
	Total	122	4,21.71

Note : Mfg.= Manufacturing

Total number of cases sanctioned by the Corporation in Greater Bombay District are given in the following statement:—

Year	Number	Amount (Rs. in lakhs)
1964-65	126	1,95.45
1965-66	63	1,06.27
1966-67	66	1,64.87
1967-68	37	1,18.34
1968-69	59	1,37.92
1969-70	120	2,09.26
1970-71	142	1,95.65
1971-72	131	2,47.68
1979-80	122	4,21.71

During 1979-80, the actual amount disbursed by the Corporation amounted to Rs. 2,72.36 lakhs.

Industrial Development Bank of India : The Industrial Development Bank of India (IDBI) was set up with its headquarters in Bombay in July 1964 as a wholly owned subsidiary of the Reserve Bank of India in terms of the Iiidustnal Development Bank of India Act, 1964, for providing credit and other facilities for the development of industry and for matters connected therewith The various activities of the Bank include (i) direct assistance td industry in the form of loans, under­writing of shares and debentures, guarantee for loans and deferred payments ; (ii) refinance of industrial term loans granted by Commercial and State Co-operative Banks, State Financial Corporations and other term financing institutions ; (iii) rediscounting of usance bills, promissory notes arising out of sales of indigenous machinery ; (iv) refinance of export credits and direct loans and guarantees in participation with commercial banks in respect of exports; (v) subscription of the shares and bonds of State Financial Corporations and other term financing institutions; (vi) promotional activities such as marketing and investment research and techno-economic studies; and (vii) co-ordinating the activities of other term-financing institutions.

Thus the Bank has been designed and empowered to function, not merely as a financing institution, but a central co-ordinating agency, which ultimately is concerned directly or indirectly with all problems relating to the long and medium term financing industrial growth.

The minimum amount of loan that is normally refinanced is Rs. 2 lakhs which is relaxed in the case of projects already assisted under the scheme; in the case of loans to small scale industries guaranteed under the Central Government's Credit Guarantee Scheme and to small road transport operators, the minimum limit has been fixed at Rs. 10,000 and Rs. 20,000, respectively.

The minimum period of loans so to be eligible for refinance is of 3 years. The maximum period in respect of loans given by Commercial and State Co-operative Banks is upto 10 years and upto 25 years in the case of term-lending institutions.

It normally refinances upto 80 per cent of the eligible loans. But in the case of loans to small scale units covered under the Credit Guarantee Scheme, loans upto Rs. 20 lakhs to small and medium sized projects, in specified backward areas and loans upto Rs. 5 lakhs in other cases, refinance is provided upto 100 per cent.

The normal rates of interest for refinance of industrial loans are 6.75 per cent and 7.00 per cent where the ceilings on the rates to be charged by the financial institutions are 10.25 per cent and 10.50 per cent, respectively. In the case of refinance of loans to small scale units, which are covered under the Credit Guarantee Scheme, a concessional rate of 5 per cent is charged, provided the lending institution itself charges not more than 8.50 per cent per annum. Recently, the rate has been reduced to 3 1/2 per cent in respect of loans upto Rs. 20 lakhs granted to small and medium sized projects in specified backward areas, provided the primary lender does not charge an effective rate exceeding 7 per cent.

The following statement reveals the statistical information of financial assistance sanctioned and disbursed by the bank to industrial units located in Greater Bombay since its inception upto 30th June 1973 :—

Particulars	Loans		Underwriting		Loans for export.		Guarantee for export
	No, of Units	Amount	No. of Units	Amount	No. of Units	Amount	No. of Units	Amount
		(Rs.)		(Rs.)		(Rs.)		(Rs.)
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
Assistance sanctioned	8	7,22.80	6	2,53.78	8	17,14.12	1	1,80.14
Assistance  disbursed	3	2,07.80	5	46.33	7	8,85.18	1	1,79.19

During the period 1979-80 the Bank sanctioned a loan amounting to Rs. 26.14,47 lakhs to 20 industrial units located in Greater Bombay. The schemewise loans distributed during 1979-80 were as under :—

Scheme	No. of units	Amount sanctioned (Rs. in lakhs)
Soft loans	10	2,181
Technical development	8	3,25.60
Project loans	1	1,05
Underwriting debentures	1	2.87

Industrial Credit and Investment Corporation of India Ltd. :  The Corporation (ICICI) is a financial institution which was established on 5th January 1955, to encourage and assist industrial investment in the country.

In pursuit of its objective of promoting private industrial investment, the Corporation grants financial assistance for various purposes including purchase of capital assets in the form of land, buildings, machinery, etc. It underwrites public and private issues and offers sale of industrial securities, ordinary shares, preference shares, debentures and debenture stock. The Corporation makes direct subscriptions to such securities The Corporation makes similar loans in foreign currencies for payment of imported capital equipment and technical services. It also guarantees payments for credits made by others.

Since its inception upto December 31st 1972, the Corporation sanctioned assistance amounting to Rs. 62,49; 30 lakhs to 144 companies in Greater , Bombay for their 230 projects.

Industrial Finance Corporation of India : The Corporation was established in 1948 under the Act of the Indian Parliament with the object of providing medium and long term credits to industrial concerns in India, particularly in circumstances where normal banking accommodation is inappropriate or recourse to capital issue methods is impracticable.

Fifty per cent of the paid-up capital now standing at Rs. 10 crores is held by the Industrial Development Bank of India, which is a wholly owned subsidiary of the Reserve Bank of India. The remaining 50 per cent is held by the scheduled banks, co-operative banks, insurance concerns and investment trusts, etc.

The main sources of funds of the Corporation other than its own capital include repayment of loans, borrowings from the market by issue of bonds, loans from the Central Government, foreign credits, etc.

The following statement reveals the progress made by the Corporation in assisting the industrial growth of Bombay.

(Rs. in lakhs)

Year	No. of concerns assisted	Total cost of these projects (Rs.)	Facilities sanctioned by the corporation	Net amount sanctioned	Amount disbursed upto 30th September (Rs.) 1973 (Rs.)
(1)	(2)	(3)	(4)	(5)	(6)
1968-69	3	3,69.31	Rupee loan,  foreign currency loan, under­writing of shares.	78.60	36.75
1969-70	2	11.00	Rupee loan, foreign currency.	7.58	7.57
1970-71	3	2,01.46	Rupee loan, direct sub­scription,  foreign currency.	1,12.13	95.01
1971-72	2	10,51.00	Rupee loan, underwriting.	28.00	6.27
1972-73	4	14,63.88	Rupee  loan, foreign currency, underwriting of debentures.	1,36.67	9.57

The rate of interest charged continued to be 8.5 per cent per annum on rupee loans, 9 per cent on sub-loans in foreign currencies and 7 per cent per annum subject to certain conditions on rupee loans for projects located in the less developed districts.

National Industrial Development Corporation: The Corporation, with its headquarters at New Delhi, renders consultancy engineering services by way of detailed design and erection of complete projects and prepa­ration of detailed project reports. It is specialised in engineering industries, pulp and paper, electronics, metallurgical and ore handling projects.The services of the Corporation are being used by the Central Government, various State Governments, public sector enterprises and private entrepreneurs in India.

Upto 1972-73, 5 companies located in Greater Bombay were assisted by the Corporation. The total loan sanctioned to these companies amounted to Rs. 2,30.36 lakhs. Of the 5 companies, which received assistance, 4 were textile mills and one engineering unit.

Maharashtra Small Scale Industries Development Corporation Limited: The Corporation was established on 19th October 1962 to promote and finance small industries. It also provides machinery, equipment, technical and managerial assistance to small scale industries. It has started a number of activities so to emerge as a multi-service agency for the small scale sector.

The Corporation started its active career in 1963 with the programme of procurement and distribution of raw materials. The raw materials supplied by the Corporation fall under three categories, viz. ferrous metals, non-ferrous metals and chemicals.

The scheme of supply of machinery on hire purchase basis is imple­mented by the Corporation since the beginning of 1964. During 1970-71, the Corporation supplied 36 machines worth Rs. 1.80 lakhs to 14 units in Bombay. The number of units as also the number of machines supplied to these units by the Corporation showed an increase during 1971-72, as the same stood at 26 and 72 respectively. The value of machinery provided to 26 units in Bombay during 1971-72 amounted to Rs. 9.07 lakhs.

The Corporation has continued to function as handling and drumming agents for State Trading Corporation for mutton tallow received at Bombay Port.

The Corporation started its import activity in 1967-68 with a view to assist small units. After the change in the import policy of Government of India, the Corporation has started collecting release orders issued by the State Trading Corporation and other agencies.

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SMALL SAVINGS

The Government of India established Savings Banks in Presidency towns as early as in 1833. Their management was transferred to the Presidency Banks in 1865 and they were extended to other towns of the country. From 1896, these Savings Banks were managed by postal department and all accounts were treated as at call as in ordinary banking. No special reserves were maintained against these deposits. This money constituted the unfounded debt and was a floating charge on the credit of the Government. The rate of interest was relatively low, at 2 per cent in 1936 and hence did not attract large deposits from the general public.The small savings movement got an impetus during World War II, and there has been further marked progress due to the efforts and schemes made for the mobilisation of small savings since 1950.

The net collection of small savings is shared between the Central and State Governments since 1952, on an agreed formula which has undergone several changes since then. In June 1958, the formula was revised and the States were to retain their entire market borrowings and in addition receive two-third of the net collection from small savings in their respective areas.

The small savings schemes are getting popularity among the poor as well as the affluent class of society. This is due to the fact that Government have introduced various schemes to suit the requirements of individuals, groups, people with low income as well as tax-payers.

Most of the small savings schemes are worked through post-offices, and the number of branches of post offices are more in number than the branches of scheduled banks. Besides, a poor man visits the post-office very often and therefore finds it more convenient to deal with post-office than with sophisticated banks.

The schemes with income-tax concessions are mainly meant for the higher strata of society. In 1984-85, the following small savings schemes were in operation :—

(i) Post-Office Savings Bank Account; (ii) Cumulative Time Deposit Account; (iii) Recurring Deposit Account; (iv) Time Deposit Account; (v) National Savings Certificates and (vi) Public Provident Fund Account. The total target and achievement in all these schemes and accounts in Greater Bombay from 1974-75 to 1976-77 and 1984-85 are shown below :—

(Rs. in lakhs)

Year	Small Savings target	Achievement
		Gross	Net
1974-75	27,00 00	47,64.99	—(46.39)
1975-76	22,0000	64,46.87	+(10,87.17)
1976-77	16,50.00	77,42.70	+(20,71.03)
1984-85	N.A.	76,983.23	+(38,214.73)

Post-Office Saving Bank: The post-office savings scheme came into force by theenactment of Government Savings Bank Act, (Source,—Post-Office Small Savings Schemes, Part I, A. N. Dureja, 1984.) 1873(5 of 1873). The same was afterwards amended by Savings Banks Amendment Act, 1959. The Post-Office Savings Bank constitutes a source for the collection of small savings especially from the people with meagre earnings.

This is the largest and the oldest savings institution and plays an important role in mopping up savings which are utilised for national development. As per the Post-Office Savings Bank General Rules, 1981, any person is eligible to open his account with a deposit of not less than Rs, 5 in any post-office either sub-post-office, branch post-office or head post-office functioning as a post-office savings bank.

The depositor receives interest at the rate of 5.5 per cent per annum (1984). No interest is allowed on any sum in excess of Rs. 25,000 in a single account or Rs. 50,000 in a joint account. The interest received by the depositor from the account is free from income tax. During 1958-59, the net collection in Greater Bombay under the scheme amounted to Rs. 20,000 which increased to Rs. 1,17,57,000 during 1960-61 and to Rs. 5,79,16,000 during 1965-66.

The collections under the scheme in Greater Bombay during 1975-76 and 1976-77 are given below :—

(Rs. in lakhs)

Particulars		1975-76	1976-77
(1)	No. of accounts	25,670	9,77,07
(2)	No. of accounts opened during the year--
	(a) target	55,000	80,000
	(b)achievement	1,72,037	22,360
(3)	Collection--
	(a) target	8,81.00	8.80.00
	(b) achievement--
	(i) gross	9,97.35	11,62.26
	(ii) net	4,18.97	95.99

The gross collection during 1984-85 was Rs. 48,76.16 lakhs, while the net collection amounted to Rs. 63.32 lakhs.

National Savings Certificates : The National Savings Certificates are issued according to Government Savings Certificates Act, 1959. At present, the Act is applicable to the 7 - Year National Savings Certificates of 2nd , 3rd, 4th and 5th issues and the National Savings Annuity Certificates.

The 7-Year National Savings Certificates 2nd , 3rd and 4th issues came in force on 16th March 1970 vide Post-Office Savings Certificates Rules, 1960 whereas the certificates of Vth issue came in force in 1974.

The salient features of the 7-Year and 6-Year National Savings Certificates are shown in the Table No. 6.

TABLE No. 6

Serial No.	Salient feature	7-Year	6-Year
		II ISSUE	VI ISSUE	VII ISSUE
1	Date of introduction	16th March 1970	1st May 1981	1st May 1981
2	Denominations	Rs. 10, 50, 100, 500, 1,000 and 5,000	Rs.10, 50, 100, 500, 1,000,5,000 and 10,000.	Rs. 100, 500, 1,000, 5,000 and 10,000
3	Period of maturity	7 Years	6 Years.	6 Years.
4	Surrender value for a Certificate of Rs. 100 Denomination at Maturity	Rs.155.50	Rs.201.50.	Rs. 100
5	Rate of interest	6-5 per cent (Compound)	12 per cent (Compound half yearly)	12 per cent (Payable six monthly)
6	Tax concession on interest	Interest-free of Income Tax	Interest-free of Income tax  upto Rs.7,000 a year  inclusive of interest on other speci­fied investments.  The tax is not deducted at source.	As for VI Issue.
7	Lock up period (period of non-encashability)	3 Years	3 Years.	3 Years.
8	Limit of holdings	Rs.75,000 for single investor (adult or minor) Rs. 1.5 lakhs for joint holders. This Limit includes all holding in the earlier issues of certificates  as  per  details given in Rule 7.	No limit	No limit
9	Exchange with prize bonds	Not permitted	Not permitted	Not permitted
10	Purchase of surrender of savings Stamps	Allowed	Not allowed	Not allowed
11	Exchange with Gift Coupons	Allowed excepting Gift coupons of Rs.5 which can be exchanged only for cash.	Not permitted	Not permitted
12	Partial discharge	Allowed after the lock-up period.	Not permitted	Not permitted
13	Pledging as security	Allowed	Allowed	Allowed
14	Conversion from one denomination to another	Allowed	Allowed	Allowed
15	Purchase by Non-resident Indians	Not allowed	Allowed	Allowed

The 6-Year National Savings Certificates (VI and VII issues) were introduced on 1st May 1981.

The gross and net collections under the 7-Year and 6-Year National Savings Certificates (The III issue was discontinued in December 1980, while the IV and V issues in April 1981) in Greater Bombay in 1984-85 were as follows:—

(Rs. in lakhs)

Particulars	1984-85
(A) 7-Year National Savings Certificates :—
(1) IInd Issue—
(a) gross	164.55
(b) net	—83.69
(B) 6-Year National Savings Certificates :—
(1) VIth Issue—
(a) gross	23,426.94
(b) net	23,334.64
(2) VIIth Issue
(a) gross	4,327.22
(b) net	4,231.74

Post-Office Time Deposits : The scheme came into force from 16th March 1970 vide Post-Office (Time Deposit) Rules, 1970. It is governed by the Post-Office Savings Bank Rules, 1965.

The time-deposit accounts are of four types, viz., 1-year account, 2-year account, 3-year account and 5-year account. Any person is eligible to open an account but the persons may apply to the post-office together with the amount of deposit which should be in integral multiples of Rs.50. Every time deposit is made in cash or by crossed cheque drawn in favour of the depositor or the Postmaster. The repayment of time-deposit is made only on the production of the pass book accompanied by an application.

The rate of interest paid to the depositor varies according to the period of time-deposit and is 9 per cent for 1-year deposit, 9.75 per cent for 2-year and 10.5 per cent for 3-year deposit and 11.5 per cent for 5-year deposit.

The interest is paid annually and is subject to income tax. The deposits in 2-year, 3-year and 5-year time-deposit accounts can be accepted through authorised agents under the standardised agency scheme.

During 1970-71, the gross and the net collections in the above-stated time-deposits in Greater Bombay were the same, and amounted to Rs. 35,36,26,000. The following statement gives gross and net collections under the scheme in Greater Bombay since 1974-75 :—

(Rs. in lakhs)

Year	Gross collection	Net collection
1974-75	82,83.08	75,22.36
1975-76	1,15,15.33	83,01.02
1976-77	52,37.57	41,33 06
1984-85	4,17,59.95	1,09,59.00

Protected Savings Scheme : The scheme was introduced vide Rule 10A of Post-Office Savings Banks (C.T.D.) Rules, 1959 and Rule 11A of Post-Office Recurring Deposits Rules, 1970. The objective of the protected savings scheme is to promote regular savings of small savers, to provide an insurance cover in case of death of the depositor without any additional charge of premium, etc. in case of 5-year cumulative time deposit or recurring deposit accounts of Rs. 5, 10, 15 and 20 denominations opened on or after 1st July 1972. The accounts opened earlier but current on this date are also eligible. Since the 5-year and 15-year C.T.D. accounts have been discontinued with effect from 1st November 1973, only the existing 10-year C.T.D. accounts are covered by this scheme. In respect of accounts of Rs. 15 and Rs. 20 denominations, the benefit is available from 2nd June 1975 onwards.

The rate of compound interest at maturity in the case of recurring deposit account is 9.25 per cent per annum. In the recurring deposit account the depositor gets income-tax-free interest upto Rs. 3,000 a year and wealth tax exemption on deposits up to Rs. 1.5 lakhs of interest, while in 5-year C.T.D. account, the depositor gets whole income-tax-free interest upto Rs. 3,000 a year and complete tax exemption in addition to general limit of Rs. 1.5 lakhs.

Cumulative Time Deposits : The scheme came into force on 2nd January 1959 vide Post-office Savings Banks (C.T.D.) Rules, 1959. The object of the scheme is to enable depositors to provide for specific purpose by means of periodical deposits repayable in a lump sum inclusive of interest at the end of a specified period. Under this Scheme, deposits of Rs. 5 or any multiples thereof but not exceeding Rs. 1,000 for a period of 10 years can be opened. The maximum limit of total deposits in all the CTD accounts held by depositor during the entire period of accounts changes from time to time, the same from 1st February 1975 being 1,20,000 in case of single account and double the amount in joint account.

The amount of interest earned on deposits in C.T.D. accounts is exempted from income-tax. The deposits are also exempted from wealth tax. The deposits under 10-year accounts are entitled for rebate of income-tax subject to prescribed limits. The 10-year accounts opened on or after 1st October 1979 are eligible for 6.75 per cent compound interest.

The net collection under the C.T.D. scheme in 1958-59 in Greater Bombay stood at Rs. 3,10,000 which increased to Rs. 6,00,000 during 1960-61, and to Rs. 74,14,000 during 1970-71 and to Rs. 75,16,000 in 1975.

The following statement gives statistics regarding number of accounts opened and amount collected under the scheme in Greater Bombay :—

	Particular	1975	1976
(1)	Number of accounts as on 1st April	1,539	14,004
(2)	Number of accounts opened in 1976-77—
	(a) Target	7,500	15,000
	(b) Achievement	2,465	4,827
(3)	Collection (in thousand Rs.)—
	(a) Target	2,20.00	2,50.00
	(b) Gross	2,26.95	2,55.22
	(c) Net	75.16	67.34

The gross and net collections in 1984-85 amounted to Rs. 9,55.60 lakhs and Rs. 5,07.15 lakhs, respectively.

Recurring Deposits Scheme: The scheme of Post Office recurring deposits (R.D.) came into force on 1st of April 1970 vide Post Office Recurring Deposits Rules, 1970. Under this scheme, only one type of account viz. 5-year account with a denomination of Rs. 5 or any multiple thereof can be opened.

The deposits opened after 1st March 1983 are eligible for 11.50 percent compound interest per year. One withdrawal not exceeding 50 per cent of the deposits is allowed after one year.

During 1970-71, the total number of such accounts was 10,018 with net collection of Rs. 5,09,000. The number of accounts increased to 1,16,173 in 1975 and to 1,71,406 in 1976. The number of new accounts opened under the scheme in 1975-76 and 1976-77 were 55,233 and 85,312, respec­tively and the gross collection under the total number of accounts during the said period amounted to Rs. 1,73 lakhs and Rs. 2,71.23 lakhs, respectively. During 1984-85, the net collection amounted to Rs. 7,78.37 lakhs.

Sanchayika Savings Scheme: Sanchayika is a savings bank run by school-going children for themselves. The scheme was started in 1965 with a basic idea to inculcate the habit of thrift in the minds of children as also to make them aware of the benefits of savings and its role in the economic development of the country. The scheme is entirely operated by the school authorities themselves. A school savings bank, called as Sanchayika opens a single savings account in the name of the school.

The Sanchayika accounts with effect from 1st November 1979, earn interest at 5.5 per cent from the Post Office savings bank. The progress of the scheme in Greater Bombay is shown in the following statement:—

	Particulars	1975-76	1984-85
(1)	Number of Sanchayikas as on 1st April	166	59
(2)	Number of membership	20,165	28,431
(3)	Collection in the year (Rs. in lakhs)	5.69	14.58
(4)	New Sanchayika formed during the year	30	59
(5)	Collection during the year (Rs. in lakhs)—
	(i) Target	0.75	N.A.
	(ii) Achievement	0.22	14.58

Small Savings Agencies: A number of small savings agencies are functioning in order to promote and popularise small savings schemes. The number of total agents on the roll as on 1st April 1976 was 988 and the total collections made through them amounted to Rs. 13,10.79 lakhs during 1976-77. During 1984-85, the number of agents increased to 7,712 and the total collections of all agents amounted to Rs. 2,79,43.82 lakhs. The following savings organisations and agencies are working at present (1984).

1. National Savings Organisation : It is working under the Ministry of Finance, Government of India.
2. Standardised Agency System: The system was introduced with effect from 1st October 1960. Under this system, authorised agents are appointed by the respective State Government authorities. These agents canvass for the sale of National Savings Certificates, Social Security Certificates and Time Deposit Accounts. They are entitled for a commission of 2 per cent with effect from 1st July 1976 for the investments in the securities.
3. Manila Pradhan Kshetriya Bachat Yojana: The scheme was intro­duced from 1st April 1972 with a view to encourage habit of thrift (among the households), to popularise C. T. D. and R. D. accounts and to raise resources for the. development plans. The area savings leaders axe authorised to Secure collections every month from, the households in C.T.D. and R.D. accounts. The area savings leader claims commission for: all ihe deposits made through him at the rate of 4 per cent with effect from 1st July 1976. The agents issue printed receipts to the depositors for the monthly deposits collected from them and deposits the amount collected at the post office. The area savings leader is attached to one post office and is given area of about 1,000 households.

The agents are of two types viz., institutional agents appointed through the National Savings Organisation and individual agents.

The agency is given to a woman either on a security of Rs. 100 or on fidelity guarantee. The number of Mahila agents as on 1st April 1975 was 83 which increased to 1168 on 1st April 1984. These agents operated 3219 C.T.D. and R.D. accounts up to 1st April 1975 which increased to 13697 accounts up to 1st April 1984. The collections under both the accounts in 1975-76 and 1984-85 amounted to Rs. 4.15 lakhs and Rs. 376.35 lakhs, respectively.
The total incentives given to these agents during 1984-85 amounted to Rs. 2.61 lakhs.

(4) Pay Roll Savings Scheme : The scheme was introduced in August 1959 with an object of promoting voluntary savings of the employees and wage earners in the private sector and was extended to Government offices in May 1962. Under this scheme an amount is deducted from the salary or wage bills of the employees every month and deposited in the post-office. The scheme is applicable to C.T.D., R.D., 2/3/5-Year T.D. accounts, 7-Year National Savings Certificates (Ilnd issue) and 10-Year Social Security Certificates.

The group leader is entitled to the reimbursement charges at the rate of 2.5 per cent with effect from 1st July 1976 for this work. Number of groups as on 1st April 1975 stood at 899, and the number increased to 1020 up to 1st April 1984.

The following statement gives statistics regarding the scheme in Greater Bombay for 1975-76 and 1984-85:—

	Pay Roll Sayings Group	1975-76	1984-85
(1)	Number of groups as on 1st April 1975 and 1984	8,99	1,605
(2)	Membership in old groups	1,42,328	8,46,566
(3)	Collections in old groups (Rs. in lakhs)	2,91.27	11,87.55
(4)	New groups formed in the year	121	143
(5)	Membership in new groups	20,870	57,898
(6)	Collection (Rs. in lakhs)—	..	..
	(i)  Target	2.60	N. A. ..
	(ii) Achievement	24.3

(5) Public Provident Fund Agency System: The Public Provident Fund Agency System was Introduced with effect from -1st November 1969; The authorised agent is entitled for commission at the rate of 1 per cent on the amount at the time of opening the public provident fund account and at the same rate on all subsequent deposits into such accounts during the tenure of the agency provided that the accounts in question are not transferred to places outside the area of operation of the agent. The agency of the public provident fund agent is for three years or it can be for a lesser period also. The total collections under this scheme in 1975-76 and 1984-85 were Rs. 55 lakhs and Rs. 2143.88 lakhs, respectively.

Unit Trust of India : Unit Scheme, 1964: The scheme was introduced by the Union Trust of India, a statutory public sector investment institution with effect from 1st July 1964. The sale of' Units' through post of Sces. was started from 1st July 1966.

The scheme attracts savings of the people through the sale of its units under different schemes. These savings are then invested in the shares and debentures of good companies for the benefit of unit holders. Income from these investments after meeting the expenses of the Trust is distributed to the unit holders annually as dividend.

The face value of a unit is Rs. 10. The application for purchase of units should be in multiples of 10 units. The units can be purchased from offices of the Unit Trust, branches of most of the commercial banks, branches of selected co-operative banks, all head post offices and departmental sub-post offices. The Units for children's gift plan are sold by the offices of Trust and branches of selected co-operative banks; while the units for unit linked insurance plan and reinvestment plan are sold only at the offices of the Trust and concerned offices of the Trust, respec­tively. The rate of dividend declared during 1982-83 was 13.50 per cent per annum.

Income by way of dividend up to Rs. 3,000 exclusively from Units is exempted from income-tax (1984). This is over and above the existing exemption limit of Rs. 7,000 for income from Units and other specified categories of investments. Investment up to Rs. 35,000 in Units is totally exempted from wealth tax. This is also in addition to the existing exemption limit of Rs. 2.65 lakhs for investment in Units and other specified categories.

Unit Scheme, 1976 (Capital Units) : The scheme was introduced on January 1st. It is primarily oriented towards achieving capital growth. The face value of each unit is Rs. 100 and the units are sold in multiples of 5. The actual sale and purchase price however, varies from time to time according to market value of the portfolio. The difference between the sale and repurchase prices varies between 8 and 10 per cent. Investments in these units enjoy the same income-tax and wealth tax exemptions as applicable to the units under the Unit Scheme of 1964.

Savings Bank Prize Incentive Scheme: The Scheme was introduced in 1973 by the Central Government to popularise Post-Office Savings Bank and to provide incentive for postal savings.

The account holders, who have kept a balance of not less than Rs. 200, which qualifies for interest for the months of December to March are eligible for participation in the draw for prizes which takes place in January and July every year. In each draw of prizes 11,116 prizes are distributed throughout the country. The first prize is of Rs. 2,50,000; five second prizes of Rs. 1,00,000 each; 10 third prizes of Rs. 50,000 each; 100 fourth prizes of Rs. 10,000 each; 1,000 fifth prizes of Rs. 500 each; and 10,000 sixth prizes are of Rs. 50 each. In all, the prizes worth Rs. 32,50,000 are distributed in each draw.

A code number for each account eligible to participate in the draw is given by the post-office in which the account stands.

A prize under this scheme is treated as income for the purpose of income-tax and is therefore liable to income-tax. In respect of prize-money exceeding Rs. 1,000 deduction of income-tax is made at source at the rate of 33 per cent of the prize-money.

Persons having single or joint accounts or accounts in the name of minors are eligible to participate in this scheme. But, public accounts, security deposit accounts, sanchayika accounts and provident fund, super­annuation fund and gratuity fund accounts in post-office savings bank are not eligible for participation in this scheme. Accounts which have not been operated upon during the past six years and have been actually treated as ' silent accounts' by the post-office are not eligible for inclusion in the draw. No account holder is eligible for more than one prize in each draw.

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INSURANCE

Historical Background: Sir John Child, the then Governor of Bombay, was instructed by the Court of Directors to constitute an insurance office in the Bombay Island. In 1793, the Bombay Insurance Society was set up in Bombay by a few well-known European merchants.

The general insurance system on modern lines was started in second half of the 19th Century and the famous 'Triton' was set up in 1850 to undertake general insurance business. In 1834, the ' New Oriental' was established and in 1871 some prominent citizens of Bombay started the Bombay Mutual Life Assurance Society. The society was not very keen on extending its operations for several years after its formation and it was left to "the Oriental Government Security Life Assurance Company Limited, the first proprietary life insurance office to be formed in India, to expand the business in an organised manner throughout India and abroad. A few years later, a few such life insurance companies such as Bharat and Empire companies were established.

In 1874, the famous 'Oriental' was started and it gave a real impetus to the insurance business in India. Its success was mainly due to its economic and sound management. In 1881 there were 107 insurance companies, of which 38 dealt with fire, 22 with life and 47 with marine insurance in Bombay. During 1892-1900, a number of Indian insurance firms were established. But the number of Indians continued to patronise foreign concerns as they were considered to be more sound than Indian firms. In 1909, Bombay contained 34 fire insurance companies, 33 life insurance companies and 55 marine insurance companies. Companies whose head offices were in Bombay numbered 7 and most of them transacted business in life insurance. The local life insurance companies were, the Indian Guarantee and Securityship Association, established in 1872 with a nominal capital of Rs. 5 lakhs; the Oriental Government Security Life Assurance Company, Ltd., which started business in 1874; the Mutual Provident and Guarantee Society Ltd., established in 1885; and the Empire of India Life Assurance Company Ltd., which commenced business in 1897 with an authorised capital of Rs. one crore.

During the early part of the present century (1901-1918), the cult of 'Swadeshi' led to the promotion of a number of Indian insurance enter­prises. Legislation was also enacted for insurance during this period. The First World War gave a further impetus to Indian insurance business. The life insurance business transacted by 1916 was to the tune of Rs. 23 crores. Insurance companies from U.S.A., China and Germany also started their operations in India.

In 1919, the New India Insurance Co. was started by Tatas first for general insurance and later in 1929 for life insurance business too. Lalji Naranji and Manu Subedar promoted the Jupiter General Insurance Co. During 1920 to 1939, a number of insurance firms were established by the Indians and the insurance business experienced a boom; well-known among these were the Vulcan, the Laxmi and the New Insurance. There were number of institutions in Indian insurance business, and high rebates, excessive commissions and increased operation expenses became the order of the day; therefore the first comprehensive legislation was enacted covering all branches of insurance and check the evils in the business.

A number of organisations such as the Life Insurance Council and the General Insurance Council were established under the Act. The first one was dissolved after nationalisation but the General Insurance Council is in existence.

The Indian Life Assurance Companies Act, 1912 was the first piece of legislation, which was later amended in 1928. This was substituted by another Act viz., Indian Insurance Act passed in 1938 in order to introduce sound business practices in India. The same was further amended in 1941, 1942, 1944, 1946 and 1948.

The immediate impact of the war was to reduce the insurance business from Rs. 43 crores in 1939 to Rs. 33 crores in 1940. But the confidence was restored and during 1941 and 1945, 25 new life insurance offices were established. Except inflation period, the insurance business showed a considerable increase. New insurance firms such as Devkaran Nanjee Trinity Mutual, Jayabharat and Ajay Mutual were floated during this period, and the business of foreign concerns declined during 1939 and 1951.

It was in the wake of the freedom movement that such companies as the New India, the Jupiter and the Laxmi came into existence. A further spurt in the formation of new companies was witnessed during the World War II when inflationary pressure tended to swell the volume of insurance business in the country. With a view to establish a closer watch in the matters of management, investment of funds and expendi­ture of insurers, Government established a department of Insurance under the authority of the Controller of Insurance and enacted the Insurance Act of 1938. This Act was extensively amended in 1950 when further controls in the interest of policy holders were introduced.

Interlocking of business and insurance finance increased the concen­tration of economic power in a few hands. In 1945, Sir Cowasjee Jehangir Committee was appointed to examine the conditions existing in Indian insurance business. The committee concluded that the interlocking of bank and insurance finance was most injurious to national economy. The legislation on the basis of the committee's report was undertaken in 1950.

A few companies including Central India Insurance were formed during the period after Second World War, but mostly the life insurance business had started consolidating its position.

1951-1956: Even though during the initial period of the First Plan, the increase in the insurance business was not significant, but during the entire plan period, there was a substantial increase in business. The staff and group insurance schemes were introduced. The life insurance business during the period was growing even though no new business units were established. The non-Indian offices were declining in importance. Life insurance was an important capital formation agency during 1955.

1956-1965'. The historic decision of nationalisation of life insurance in India was declared on 19th January 1956 by the then Finance Minister which affected 154 Indian insurance firms, 16 non-Indian insurers and 75 provident societies.

By the Life Insurance (Emergency Provisions) Ordinance 1956, the management and control of life insurance business in India including foreign business of Indian insurers and the Indian business of foreign insurers was vested in Central Government and thus business in life insurance passed from the private sector to public sector. This was the first step towards complete nationalisation of life insurance business in India, a step never attempted anywhere in the world before on such a gigantic scale and which opened a new chapter in the history of Indian insurance. A comprehensive legislation was introduced shortly afterwards and resulted in the enactment of the Life Insurance Corporation Act of 1956.

Nationalisation aimed at widening and deepening all possible channels of public savings and mobilising these savings more effectively to finance development plans.

On September 1, 1956, the Life Insurance Corporation of India was established and took over the entire assets and liabilities of life insurers in India. From 1957, there was a steady rise in the new business in India as well as outside India. But the inflationary trend in the economy did lead to an upward trend in the expenses of Life Insurance Corporation.

By the end of the IIIrd Five-Year Plan, insurance consciousness spread significantly in the country. About 70 per cent of new life policies were issued to persons participating in insurance for the first time. A number of new schemes were introduced by the Corporation such as group and joint saving insurance, salary saving schemes or collection of premium through the post-offices. The Corporation also actively supported the house building activities through the life insurance policies.

In 1958, number of proposals for life insurance in Greater Bombay stood at 73,779 and the same increased to 94,510 in 1959. The sum proposed in 1958 was Rs. 40,94,33,681; and the same increased to Rs. 51,48,37,717 in the following year. Number of policies and sum assured also showed an increase in Greater Bombay as follows:-—

	Number of Policies	Sum assured (Rs.)
1958	66,996	37,27,00,572
1959	84,045	45,95,77,783

Structure and business of Life Insurance Corporation : The Life Insurance Corporation of India, was set up in 1956 to take over the life insurance business of all the insurance business in India. In 1964, it entered the field of general insurance. The capital of the Corporation is wholly provided by the Central Goverrment. The head office of the Corporation is in Bombay and there are five zones with their zonal offices at Bombay, Calcutta, Madras, Delhi and Kanpur.

The Corporation is managed by the Board of Directors. The policy directives are issued by the Government of India, and it is interpreted by the Board of Directors. The policy is applied by the executive committee. It also co-ordinates and controls the functions of different departments.

Network of offices of the Corporation : On the eve of nationalisation, there were 245 private insurance companies operating in the country; that covered nearly 97 centres. The prospects of expansion of business remained fairly limited prior to the nationalisation as the erstwhile insurers were mainly interested in catering to the needs of urban populace where insurance business was profitable and there for interior rural centres were neglected. The nationalisation witnessed a shift in the out­look of the general populace, in their way of thinking and spread of life insurance came to occupy the foremost importance. As a result, a large number of offices were opened to undertake the life insurance business. The growth in its activities can be seen from the following statistics:—

Year	Number of Branch Offices	Number of Sub-offices
1956	182	34
1960	267	120
1965	388	145
1970	424	115
1976	659	23

In 1981-82, the district-wise branches of the Bombay division, of which the Greater Bombay district forms a part, were as follows :—

Greater Bombay 62; Thane 8; Raigad 2 and Goa 5. The departments of training of agents, salary savings scheme, and gioup insurance and superannuation, are also located in Bombay.

The area-wise branches of Life Insurance Corporation in Greater Bombay during 1981-82 are shown below :—

Area	Number of branches
Fort	24
Dadar	4
Sandhurst Bridge	5
Goregaon	1
Ghatkopar	1
Vikhroli	1
Bandra	1
Santacruz	5
Malad	1
Andheri	1
Kurla	1
Borivli	1
Mulund	1
Chembur	1
Nariman Point	7
Churchgate	1
Kandivli	1
Khodadad Circle	2
Ballard Estate	3

Agency Force : An agency unit forms a link between the Corporation and its policy holders. There were more than 2 lakh agents on the roll of the Corporation in 1956, the number of active agents was, however, small. There was, however, dropout in the total number of agents for various reasons, the principal among them being the inability of quite a large number of part-time agents to do the minimum quantum of business laid out by the Corporation.

The strength of life insurance agents in Greater Bombay area is given below:—

As on	Number of Agents
31st December 1956	16,105
30th April 1960	7,626
31st March 1968	12,327
31st March 1976	12,542
31st March 1982	8,683

Out of 8,683 total agents in Greater Bombay in 1981-82, 6 were crorepati agents who undertook a business of Rs. 697.41 lakhs.

Career Agents : The Career Agents Scheme was launched in 1972 to attract educated youth towards life insurance business. These career agents have made sizeable contribution to business production. The LIC started this Scheme in the beginning at 13 centres in the country, by the end of 1976, the strength of these centres rose to 38 including Greater Bombay. Besides there were eight direct agents in Greater Bombay district in 1975-76.

Development Officers '.Besides the agents, the LIC gets business through the Development Officers appointed for the specific purpose. Since nationalisation of insurance the Development Officers play a pivotal role in recruiting, guiding, and supervising the agents. The LIC had 4830 Development Officers in 1958 in the country with an average business per Development Officer of Rs. 6.5 lakhs. The number incieased to 7698 during 1975-76 along with the average business per Development Officer which amounted to Rs.23.6 lakhs. There were 50 crorepati Development Officers in Greater Bombay in 1981-82 whose individual new business was more than one crore of Rupees. The strength of Development Officers in Bombay division and in Greater Bombay area during the same period was as follows :—

Year	Bombay Division	Greater Bombay District
1958	304	N.A.
1975-76	611	547
1981-82	515	449

Progress of New Business : The total new business of the Life Insurance Corporation at the time of nationalisation in terms of sum assured was Rs. 1,48.5 crores. The various measures adopted since nationalisation resulted in a spectacular increase in the individual new business as in 1975-76, the Life Insurance Corporation completed a new business of Rs. 21,16.30 crores under individual assurance and Rs. 32,69.04 crores under group insuiance making a total of Rs. 53,85.34 crores. The relevant figures for the Bombay division and for the Greater Bombay area are shown below:—

(1) BOMBAY DIVISION

Year	New business in terms of policies	New business in terms of sum assured (ordinary assurance) (Rs. in crores)	New business in terms of sum assured (Group insurance and superannuation scheme) (Rs. in crores)	Average sum assured per policy (ordinary assurance) (Rs.)
(1)	(2)	(3)	(4)	(5)
1956	68,776	33.45	3.76	4,863
1965-66	1,44,723	1,05.80	15.65	6,229
1970-71	1,41,609	1,81.46	45.38	9,612
1975-76	1,80,939	2,22.43	1,68.36	12,293

(2) GREATER BOMBAY

Year (1)	No. of proposals (2)	Sum proposed (Rs.) (3)	No. of policies (4)	Sum assured (Rs.) (5)
1958	73,779	40,94,33,681	66,996	37,27,00,572
1959	94,510	51,48,37,717	84,045	45,95,77,783
1965-66	N.A.	1,03,84,11,269	1,30,210	1,00,33,57,371
1967-68	N.A.	1,03,32,48,426	1,06,280	97,95,74,101
1975-76	1,62,262	37,62,76,500	15,600	36,60,16,200
1981-82*	3,27,345	6,28,77-37	1,54,980	2;29,04 76

*Figures of Rupees for the year 1981-82 are in lakhs.

Business under Salary Savings Scheme : The salary savings scheme was implemented with effect from 1st September 1966, on an experimental basis in some of the offices situated in Bombay. Subsequently the Government extended it to class III and class IV government servants working in all the offices and departments throughout the State of Maharashtra.

In 1969, the salary savings scheme was finalised with approximately 3,800 firms/institutions in Greater Bombay and the number of policies secured under the scheme from the employees of these firms/institutions was approximately 3.5 lakhs.

The progress under this scheme during 1974-75 and 1975-76 in Greater Bombay was as follows :—

	1974-75		1975-76
	Number of policies	Sum assured (Rs. in lakhs)	Number of  policies	Sum assured (Rs. in lakhs)
Greater Bombay	53,900	40,35.5	51,263	38,55.07
Bombay Division	66,487	4,48,41.21	62,997	46,34.40

Business under Group Scheme : The following statement gives the business of group scheme by G and S Department (Group Insurance and Superannuation) completed, through branch offices in Bombay division and also in Greater Bombay area during 1975-76 :—

Division/District	Number of Schemes	Number of Lives	Sum   assured Rs.	Annuity per annum Rs.	Premium income Rs.
Bombay Division	272	30,117	36,30,24,921	2,48,364	1,70,72,740.78
Greater Bombay	262	27,740	35,04,70,726	2,48,364	1,62,87,019.71

First Premium Income : The statistics of first premium income for both the Bombay division and Greater Bombay branches are given below :—

	First Premium (1975-76)
Division/District	Non-salary savings scheme	Salary Savings scheme	Total
Bombay Division	7,20,26,983	22,01,994	7,42,28,977
Greater Bombay	6,65,46,259	18,59,904	6,84,06,163

During 1975-76, the Corporation introduced a special policy known as the Grihalaxmi Policy designed to provide life-long security for the housewife. The main feature of the policy is that while the husband who is the proposer pays the premium, the wife is the beneficiary and a trust in her favour is created under section 6 of the Married Women's Property Act. The plan provides return of all premia to the proposer if the bene­ficiary dies before the age of 55.

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