Evolution of Banking in Kerala

The Imperial Bank of India, the Indian Bank and the Central Bank were the main banks operating in Travancore in the 1920s. The business of the Bank, other than taking deposit, was confined to discounting of trade bills and extending demand loans against gold and produce and overdraft and cash credit to a limited extent. Many of the banks during that times, were operating in some regions, type of banking was limited to the trades of that area. Their area of finance was mainly local trade, short-term agriculture and to a limited extent local industries. The normal mode of lending was on the security of promissory notes under joint signatures, against gold and landed properties. Besides the registered financing institutions, a lot of indigenous banks were operating under different names. The loans sanctioned by the private money lenders were mostly linked to the cropping season. But they had little individual base to support any meaningful economic activity in the region.

Formation of Travancore Bank Limited

Several banks had collapsed in the late 1930’s in Travancore, undermining public confidence in the banking system. As part of the post-war reconstruction plan, an idea come up of starting of full fledged commercial bank with the investment of, and control by the Government. It had to entrust the treasury business to the new state controlled Bank. A large scale industrialisation drive was on the cards with the availability of cheap power from the State’s first hydro-electrical project.

The situation demanded the presence of a strong bank commanding not only credibility among the public, but also the financial capacity to participate in the economic development of the land. Maharaja Chithira Thirunal, the ruler of Travancore, had the vision to set it up as a fully State-backed bank dedicated to the prosperity of the land and its people. In principle approval was accorded on 04.12.1944 and sanction for Public was given in August 1945. The Travancore Bank Limited was registered on 12.09.1945.

Transformation to State Bank of Travancore

The SBI (Subsidiary Banks) Act, 1959 enacted under special stature of the Parliament was a sequel to the SBI act promulgated in 1955 for nationalising the erstwhile Imperial Bank of India. For furtherance its avowed objectives, its consolidation into the status of premier bank of the nation and the first commercial bank in the public sector acting also as agents to RBI in conducting Government business and maintaining currency chests it to be strengthened for an all India reach. It extended to the leading banks of the erstwhile princely states, by making them subsidiaries to SBI. This was different from takeovers or amalgamations, as each of the Subsidiary Banks was strong enough and could remain independent, with the considerable dominance and clout they had in their respective main areas of operation. The Act provided them to be independent entities, but under the control and powers of the SBI. Thus Travancore Bank Limited became State Bank of Travancore on 01.01.1960. SBI held over 50 percent of the paid up capital of Rs.1 crore, a block was in the hands of the Government of Kerala and the remainder was controlled by the Travancore Royal family; a small quantity was in the hands of the general public.