COMMERCIAL BANKS

The industrial sector is relatively more organized and less dependent on natural factors 

than agricultural sector. Hence, the commercial banks tended to concentrate more on industrial 

sector than agricultural sector. The Indian Central Banking Committee (1931), the Agricultural 

Finance Sub-committee (1945), the Rural Banking Enquiry Committee (1950), the All India 

Rural Credit survey committee (1951), the All India Rural Debt and Investment Survey (1961-

62) and the Informal Group on Institutional Arrangements for Agricultural Credit (1964) - all 

these expert committees were of the opinion that co-operatives and not the commercial banks 

were the suitable credit agencies for agriculture.

Financing agriculture by commercial banks was not significant until 1950. However, the 

Rural Banking Enquiry Committee (1950) recommended that banking facilities should be 

extended to rural areas. The commercial banks were reluctant to enter the field of agricultural 

finance as they felt that it would be risky and costly. The Imperial Bank of India was established 

in 1921 by the amalgamation of the Presidency Banks (Bank of Bengal, Bank of Bombay and 

Bank of Madras). Until the establishment of the Reserve Bank of India in 1935, the Imperial 

Bank of India was the sole banker to the government. As there was no branch for RBI, the 

Imperial Bank of India acted as an agent of the RBI for the purpose of transacting businesses of 

government.

In 1955, the state Bank of India Act was passed and Imperial Bank India was named as 

the State Bank of India. In 1959, State Bank of India (Subsidiary Banks) Act was passed and 

seven Associate Banks or Subsidiary Banks of SBI were started functioning. They are:

State Bank of Mysore

State Bank of Travancore

State Bank of Sowrashtra

State Bank of Hydrabad.

State Bank of Bikanir and Jaipur. 

State Bank of Patiala. 

State Bank of Indore.

The role of commercial banks in rural credit was negligible until the sixties as is evident 

from the All India Debt and Investment survey Report, 1961-62 and 1971-72. They had shown 

little interest in direct financing of agriculture and had confined their financing activities to the 

movement of agricultural produces only.