Mahatma Gandhi’s Bank of Choice

In a world where economic independence defines the strength of nations, a bank is far more than a financial institution. It serves as a bridge to opportunity, a wellspring of hope, and a steadfast pillar of trust for individuals and communities. For Punjab National Bank (PNB), founded in 1894, this has always been true—but even more so because its story is intertwined with India's fight for self-reliance. It was not simply about opening an Indian bank; it was about kindling a movement against a colonial system that marginalised Indian voices. Built on the Swadeshi ideal of reinvesting capital back into the country’s own economy, PNB remains committed to supporting India's growth and self-sufficiency, bridging its founding vision with its role in a rapidly evolving India

Economic Landscape of India in the 18th & 19th Century: The Need for Change

In the late 19th century, British colonial rule had reduced India from a global economic powerhouse to a nation on the brink of poverty. Once commanding 23% of the world’s economy in 1700, India’s share had plummeted to a mere 3% by the time the British left. Over time, British policies siphoned wealth out of India to the tune of what would now be valued at over $45 trillion.

A little recap of the mid-19th century, British banks in India, such as the Bank of Bengal (founded in 1806), the Bank of Bombay (1840), and the Bank of Madras (1843)—collectively known as the Presidency Banks—played a large role in India’s wealth extraction. These banks operated mainly to channel India’s wealth toward British projects and enterprises, providing credit primarily to British companies and government infrastructure projects like railways and ports. Loans were generally not accessible to Indian businesses, with only a few well-connected Indians benefiting from them.

For most Indians, especially farmers who relied on credit to purchase seeds and tools, banking access was almost negligible. Local moneylenders filled the gap but often charged exorbitant interest rates, leaving over 95% of the population unbanked and vulnerable to debt. 

Many Indian entrepreneurs made several early attempts to establish their banks. The Oudh Commercial Bank, founded in Faizabad in 1881, was one of the first banks managed entirely by Indians. However, due to limited resources and the competitive edge held by British-backed banks, it struggled to gain traction and ultimately folded after a few years. These setbacks only deepened the determination among India’s leaders, reinforcing the urgent need for a truly Indian-owned bank that could stand strong and help India achieve economic self-reliance.

‍The Founding of PNB: A Bank for the People

In pre-partition Punjab, a unique situation emerged after the British annexed the region in 1849. The East India Company introduced a cash revenue system that boosted agricultural productivity. By the mid-19th century, agricultural and industrial innovations flourished, especially in cotton production during the American Civil War, creating financial opportunities for Indian entrepreneurs. This growth fostered wealth accumulation and a growing awareness of British rule's political and economic implications, leading many to embrace Swadeshi ideals of self-reliance and independence.

From this atmosphere, the idea for a “Swadeshi” bank gained momentum. Pioneers like Rai Mul Raj and Lala Lajpat Rai envisioned a bank that would not only serve the financial needs of Indians but also reinvest Indian capital back into the community. 

In early 1894, at Rai Mul Raj’s insistence, Lala Lajpat Rai sent a circular to a select group of friends, advocating for the formation of an Indian Joint Stock Bank. Lala Harkishan Lal, who had recently returned from England with fresh ideas on commerce, was also interested in such an initiative. He began to discuss these ideas with other influential figures, including Nagendranath Gupta, editor of The Tribune, EC Jessawala (Partner of Jamshedji Co.) Sardar Dyal Singh Majithia (Founder of Dayal College), Lala Prabhu Dayal (merchant and philanthropist), Bakshi Jaishi Ram (Civil Lawyer)  and other members of the Lahore Arya Samaj, Lala Dholan Das, Lala Mul Raj, Lalalal Chand, Kali Prosanna Roy (Arya Samaj Members)

On May 23, 1894, at Dyal Singh Majithia’s residence in Lahore, the blueprint for PNB was sketched out.. They published the bank’s prospectus in The Tribune, Urdu Akhbar-e-Am, and Paisa Akhbar, drawing attention to their cause. The founders decided to establish their first office in a rented house in the bustling Anarkali Bazar of Lahore, West Punjab.

Punjab National Bank (PNB) was officially established on April 12, 1895, a day before the Baisakhi festival. With an authorized capital of Rs. 2 lakhs and a working capital of Rs. 20,000, the bank began its journey with nine staff members. Lala Lajpat Rai himself was the first account holder, and his younger brother was appointed as the bank’s manager.  Right from the start, it was clear that the control of the bank was to lie with the people. During the bank’s first meeting, the founders and directors chose to keep only a limited number of shares for themselves. This approach meant no single group or individual had disproportionate power or influence over the bank’s decisions.

This commitment to trust and community involvement drew the attention of many notable leaders, including Mahatma Gandhi, Jawaharlal Nehru, Indira Gandhi, and Lal Bahadur Shastri, who chose to open their bank accounts with PNB over the years. Gandhi’s choice to bank with PNB highlighted his support for the Swadeshi movement and the idea of economic self-reliance. 

‍Early Years of  PNB: 1895 - 1946

PNB distinguished itself by adopting innovative practices. In 1895, the bank appointed auditors, demonstrating a commitment to transparency and accountability well before it became a regulatory requirement. Later, it also introduced the "teller" system in Indian banking, improving customer service and streamlining operations.

In 1913, a staggering 78 banks collapsed yet Punjab National Bank emerged resilient. Mr. JH Maynard, the then Financial Commissioner of Punjab, remarked, “Your Bank survived...no doubt due to good management.” This reinforced the public's confidence in PNB’s leadership and operational integrity. 

The five years from 1941 to 1946 saw unprecedented growth for PNB, as the number of branches increased from a modest 71 to 278. Deposits surged from Rs. 10 crores to Rs. 62 crores, reflecting the trust placed in the bank and the growing demand for accessible banking services. This expansion was fueled by strong demand for accessible banking services in West Punjab, where many small businesses and local industries were beginning to flourish despite the oppressive economic conditions imposed by British rule.

Navigating the Impact of Partition on PNB

However, the shadow of Partition in 1947 cast a long and difficult road ahead for PNB. The division of India and Pakistan led to widespread violence and mass displacement, with Punjab—especially Lahore—bearing the brunt of the turmoil. Many PNB branches in the newly formed Pakistan were seized, cutting the bank from substantial portions of its assets. In fact, 33% of its offices in West Pakistan accounted for 40% of its deposits, which PNB lost during the Partition. Tragically, 15 of its employees lost their lives amid the violent chaos. Customers lost everything, including their savings and investments, leading to immense pressure on PNB to find solutions for its displaced clients.

In response to these overwhelming challenges, PNB made the difficult decision to relocate its headquarters to Delhi, effectively restarting its operations. During this challenging period, PNB's role evolved beyond that of a traditional bank. The staff innovated record-keeping and verification processes, relying on memory and community networks to support displaced clients in accessing their savings. 

As the nation sought to assert its identity and escape colonial rule, banks like PNB became symbols of hope and connection. Account holders shared a personal bond with the bank, exemplified by Dr. Santokh Singh’s story whose family moved from Lahore to Amritsar during the partition. He fondly remembers that they kept their account at PNB as long as his father was alive, highlighting the strong ties that many families shared with the bank during such pivotal moments in history.

Expansion and Growth: PNB's Journey Post-Independence

Following India's independence, Punjab National Bank (PNB) rapidly expanded its footprint by acquiring Bharat Bank Ltd. in 1951 and merging with Indo-Commercial Bank in 1962. Nationalized in 1969, PNB became the second-largest bank in India, with over Rs. 355 crores in deposits and more than 569 branches. The bank launched initiatives like the PNB Vikas Program and established Regional Rural Banks to provide financial services and education to rural populations, addressing poverty and promoting agricultural development.

PNB has consistently supported small and medium enterprises (SMEs) and micro, small, and medium enterprises (MSMEs) through initiatives such as the PNB Udyog Scheme and participation in the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). Its strategic acquisitions, including Hindustan Commercial Bank and a merger with Oriental Bank of Commerce, have established PNB as India's second-largest public sector bank by assets. Additionally, PNB has expanded internationally with subsidiaries in the UK and Bhutan, a joint venture in Nepal, and plans for a representative office in Dubai, reinforcing its global presence.

‍Present Landscape

As of 2024, PNB was awarded the Best MSME Friendly Bank of the Year. It achieved the remarkable milestone of Rs. 23 lakh crore in gross business and registered a staggering 228% year-on-year growth in net profit, reaching Rs. 8,245 crores among all Public Sector Banks in the 2023-24 financial year.

Today, PNB stands as India’s second-largest bank by branch network, serving over 180 million customers through its extensive network of over 11,000 branches across all six lakh villages in India. From its inception, Punjab National Bank has been committed to uplifting local industries and supporting their economic aspirations. This foundational idea resonates through the bank's modern initiatives, where it continue to empower the growth of the rural economy and small businesses. By nurturing growth in these vital sectors, PNB not only honors its legacy but also plays a crucial role in shaping a resilient and inclusive economy for the future.

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