Nationalization of banks, came up with political
will by an ordinance passed on july 19, 1969 exactly 50 years back from now.Down
the lane of Indian history, 1960’s was a roller coaster decade with respect to
every sphere like two wars with china
and pakistan, drought situations in india,fiscal retrenchment through 3 year
plan holiday..etc. All these led to economis crisis and then government
resorted to nationalization of banks i.e the process of transforming private assets into public assets by
bringing them under the public ownership of a national government or
state.The main objectives of then government were:
1.
banking had to spread, giving access to both
the rich and the poor to fulfill its
socio-economic objective.
2.
Banking was
necessary for development and to extend the reach of government programmes.
It nationalized, 14
banks in 1969 and another 6 banks in 1980 by Banking Companies (Acquisition and
Transfer of Undertakings) act 1969.
Now, after 50 years, if
we evaluate how far the objectives have been fulfilled, it could be said that
the government had made a great journey, and it still have to.
The schemes like JAM
trinity, led to financial inclusion, The bank coverage in the country increased
considerably and spread to rural areas with
47,443 branches.
Now,banks gave its support in facilitating
direct benefit transfers, thus expedited the transparency in governance.
The credit facilitation
schemes by banks like loan melas, credit cards,no interest EMI ..etc have become
boon to middle class people and also gave impetus to demand driven productivity
in country.It expanded its services through internet banking,mobile banking
thus competing well with the other private banks.
Under priority sector
lending, 40% of corpus should be utilized, thus schemes like Mudra yojana,
agriculture crop loans, kisan credit cards scheme,housing loans, loans to SME enterpreuners.
Etc have threw away middle men, money lenders and created self employment..etc.
On other side, public
sector banks face critical situations as,
1.
Bad loans
turning out to be NPA’s creating chaos in banking process.
2.
Operational
losses, bad asset management, regional imbalances in banks coverage etc
3.
Political
interference creates instability in efficient working of psb’s.
Thus, if evaluated critically,
the nationalization of banks has no doubt led goverment to fulfill its
objective to the zenith and other draw backs would be side effects of any
development.They should be addressed with present government intervention.
Nationalization of banks were considered as single most important economic decisions taken by government after 1947 some even say that even 1991 economic reforms looks pale in comparison
Situations led to bank nationalisation
1.immense pleasure on public finances due to 1960 to 1965 wars
2.two successive years of brought lead to food shortages
3.large dominance of credit profiles by big businesses that totally neglected priority sectors
Impact on development since Bank nationalisation
1.Since nationalisation financial saving rose as number of bank started expanding too many areas
2. Gross domestic savings almost doubled as percentage of National Income in 1970 these domestic savings were used as investments in development activities
3. Nationalisation of banks helped to promote Rapid growth in agriculture small industries and exports and to develop backward areas
4.Nationalisation led to simplified and rationalize the credit structure where where repo rate was managed by central bank and lending rates were decided by psu's themselves this facility lead to more financial inclusion
Challenges that banking sector facing of since nationalisation
1.high political control on banks lending ended up with issues bad loans (gross bad loan ratio 9.6% in 2017)
2.capitalism corruption and miss governance in internal functioning of banks
Recent reforms by government
1.For more efficiency in banking sector like asset quality review initiated by RBI in 2015 to recognise all non performing assets.
2.Recapitalisation of banks that focus more on strengthening public sector banks increasing lending to msme's
3..Establishing Bank board Bureau that oversees internal functioning and high appointments
Even though banks facing with many challenges the nationalisation of bank had prove to be successful in financial inclusion and supplemented to achieve National socio-economic targets
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