Source: SBI History (Volumes 1, 2 and 3)
The history of SBI by Prof Amiya Kumar Bagchi (first two volumes, 1806 – 1876 and 1876-1921) and Abhik Ray (third volume 1921-55) are much more than just mere banking histories. These are must read books for anyone interested in not just economics and banking but also about society, legal aspects, regional diversity and so on. One could easily use these volumes along with books on Indian economic and political history. The regional dynamics captured by these books is unparalleled.
The amount of effort which has gone into preparing these epics would require couple of lifetimes. To do it, in just one is nothing short of a miracle. But it is a pity that these books are rarely even mentioned in any courses in India (I am not aware of any). These are books which just lie dusted in old libraries. It is unlikely new libraries will even order them.
Anyways, one can just appeal and hopefully these volumes are used to teach as well. this blog shall also try and post on different aspects from these tomes.
Earlier this blog posted on how branch banking started in India. We take branches of a bank as pretty much goven now. But this is not how it was. It took significant time for the Presidency Banks and later Indian banks to develop branch banking. Infact, history of all these branches gives you rare glimpses of India’s local economy which is mostly missed in India’s economic and business history. So history of branch banking is much more than just looking at bank expansion which is usually the case. Closer details of these branches tells you wonderful tales on how Indian cities and towns actually worked.
So here is the short story of first such branch..
The Presidency Banks started like unit banks with just a single branch. You could call them Local Area Bank as well as they just remained in their respective regions.These banks were first allowed to open branch in 1838.
Only Bank of Bengal was operational then which opened its branch in Mirzapur. However, the branch had to close down in 1847, just 9 year later as there was limited scope for branch banking at that time.Both Bank of Bombay and Madras did not venture into branching given their own troubles and also seeing the experiences of Bank of Bengal.
In 1861, as the government made a case for branch banking, Bank of Bengal again opened one of its branches in Mirzapur in March 1862 (first was in Rangoon in 1861). As luck would have it, the branch had to again close down in 1876 as it could show no profits. The Bank of Bengal again failed to make a business case for its most favored branch.
By 1921, the three Preisdency Banks had merged into Imperial Bank of India. The three centres of Calcutta, Bombay and Madras were converted into Local Head Offices (LHOs). Thus, it was the Calcutta LHO which decided to make yet another effort to re-engage with its oldest branch.
In 1921, Imperial Bank was given a mandate to open 100 branches in India. This was an unheard of mandate even at a global level. It is ironical that under this 100 branch program, Mirzapur which was the first bank branch also emerged as a location for branching.
On 14 Dec 1924, the branch was reopened again.
Why Mirzapur? It was the largest shellac manufacturing centre and had a thriving carpets and brassware business as well. However, due to strong presence of local moneylenders, the branch could not take-off at all. The growing importance of cities like Allahabad, Benares and Cawnpore and railway connectivity between them led to decline in importance of Mirzapur as well.
The average deposits of the branch in 1925-26 were in the range of 1 lakhs – 4 lakhs whereas in other cities of e Allahabad, Benares and Cawnpore it hovered around 20-25 lakhs during the same period.
- Even the shellac industry was highly volatile due to speculative nature of the trade. Yearly exports as well as prices of raw materials for making shellac widely fluctuated during the year. The shellac traders were also considered dubious by the branch.
- The carpets industry were monopolised by two British firms who exported directly via Calcutta. They had their finances arranged by the exchange bank based in Calcutta. The Presidency Bank was barred from foreign exchange business and thus the branch could do little.
- The brassware industry comprised of several small players who were not large enough to qualify for assistance from the bank.
Besides these industries, there were stone quarries whose finance was not approved by the bank management. The same industry continued to be financed by Allahabad Bank branch. The agricultural produce was just for self-consumption and not much local mandis around. Even gold loans could not take off.
THe branch kept making losses for most part of its coming and going existence. It made its first profits in 1931 but was soon engulfed in losses due to Great Depression. So, had no choice but to close in 1933.
The branch was again opened on 1953 and thankfully this time it did not close down.