impact pf nationalization of banks on economy

1. NATIONALISATION of
BANKS
INTRODUCTION &
JUSTIFICATION

2. PROJECT GUIDE-
ANJALI YADAV
 PRESENTED BY-
1. PRIYAM VISHWAKARMA (50)
2. RIYA GUPTA (58)
3. NIDHI TIGGA (40)
4. ANKITA SALNI TOPPO (08)
5. NISHA CHHAVI KINDO (43)

3. INTRODUCTION
 In 1947, partition of Hindustan & Pakistan hurt the
banking sector as well.
 The average capital of the failed banks between 1947 and
1955 was significantly lower than the average size of paid
up capital of reporting banks in the industry.
 1948- worst years for the relatively larger banks-45
institutions were closed down.
 Bank deposits mobilised by commercial banks were largely
lent out to security based borrowers in trade and industry.

4. INTRODUCTION
 After independence the government of India(GOI) adopted
planned economic development for the Country. Accordingly
Five Year plans came into existence since 1951.
 In 1950-51 there were 430 Commercial Banks. The GOI had
some social objectives of planning. These commercial Banks
failed helping the Government in attaining these objectives.
 Banks were controlled by business houses, failed to cater need
of cottage industry, poor people etc.
 Thus, the Government decided to Nationalise 14 major BANKS
with a deposit base over Rs.50 crores were Nationalised.

5. INTRODUCTION
 First bank to be nationalised was RESERVE BANK OF INDIA on
1January,1949.
 Nationalisation of Imperial Bank of India and its conversion into
State Bank of India in July,1955,june 1956
 Conversion of 8 major states associates banks into subsidiary
banks in 1959.
 Nationalisation of 14 other Indian scheduled banks in July, 1969.
 Nationalisation of 6 more banks in April,1980.
 At present, there are 26 scheduled banks in public sector. Out
of these,19 banks are nationalised.

7. 14 COMMERCIAL BANKS
1) CENTRAL BANK OF INDIA (21 Dec.1911)
2) BANK OF INDIA (7 Sep.1906)
3) PUNJAB NATIONAL BANK (19 May 1894)
4) BANK OF BARODA (20 July 1908)
5) UCO BANK (6 Jan. 1943)
6) CANARA BANK (1969)
7) UNITED BANK OF INDIA (1950)
8) UNION BANK OF INDIA (11 Nov. 1919)
9) DENA BANK ( 26 May 1938)
10) ALLAHABAD BANK (24 April 1865)
11) BANK OF MAHARASHTRA (1935)
12) INDIAN BANK (15 Aug.1907)
13) INDIAN OVERSEAS BANK (10 Feb.1937)
14) SYNDICATE BANK (1925)

8. 6 COMMERCIAL BANKS
 Encouraged by the success of the first spell of the
nationalisation of the banks six more banks in the private
sector, having deposits more than ₹200 crores were
nationalised on 15th April,1980.
1) PUNJAB AND SINDH BANK (24 June 1908)
2) ANDHRA BANK (20 Nov.1923)
3) NEW BANK OF INDIA (1936)
4) VIJAYA BANK (1931)
5) ORIENTAL BANK OF COMMERCE (19 Feb.1943)
6) CORPORATION BANK (12 March 1906)

9. SBI & Its 5 ASSOCIATES
According to government orders issued on February 22,2017
under the State Bank of India Act,1955, the entire
undertaking of-
1. STATE BANK OF BIKANER & JAIPUR,
2. STATE BANK OF MYSORE,
3. STATE BANK OF TRAVANCORE,
4. STATE BANK OF PATIALA,
5. STATE BANK OF HYDERABAD
Will stand transferred to and vested in STATE BANK OF
INDIA from April 1,2017.

10.  Also BHARATIYA MAHILA BANK (BMB) has merged
with the country’s largest lender STATE BANK on
April 1,2017 to ensure greater banking outreach
to WOMEN.
 PUNJAB NATIONAL BANK acquired NEW BANK OF
INDIA in 1993.

11. JUSTIFICATION
THE NATIONALISATION OF COMMERCIAL BANKS TOOK PLACE
WITH AN AIM TO ACHIEVE FOLLOWING MAJOR OBJECTIVES-
 SOCIAL WELFARE- It was the need of the hour to direct
the funds for the needy and required sectors of the Indian
economy. Sector such as agriculture, small and village
industries were in need of funds for their expansion and
further economic development.
 CONTROLLING PRIVATE MONOPOLIES- Prior to
nationalisation many banks were controlled by private
business houses and corporate families. It was necessary
to check these monopolies in order to ensure a smooth
supply of credit to socially desirable sections.

12. JUSTIFICATION
 EXPANSION OF BANKING- In a large country like India the
numbers of banks existing those days were certainly
inadequate It was necessary to spread banking across the
country. It could be done through expanding banking
network(by opening new bank branches) in the unbanked
areas.
 REDUCING REGIONAL IMBALANCE- In a country like India
where we have a urban-rural divide, it was necessary for
banks to go in the rural areas where the banking facilities
were not available. In order to reduce this regional
imbalance nationalisation was justified.

13. JUSTIFICATION
 PRIORITY SECTOR LENDING- In India, the agriculture
sector and Its allied activities were the largest contributor
to the national income. Thus these were labelled as the
priority sectors. But unfortunately they were deprived of
their due share in the credit. Nationalisation was urgently
needed for catering funds to them.
 DEVELOPING BANKING HABITS- In India more than 70%
population used to stay in rural areas. It was necessary to
develop the banking habit among such a large population.

14. JUSTIFICATION
 MONETISATION ISSUE- Commercial banks accumulate
deposits from the public. They are in a position to bring
changes in the supply of money. Such an important power
should not be in the private sector. It is the public sector
that should have the control over money supply.
 INTEGRATION ISSUE- Central Banks are established by the
Govt, for overall monetary control in the economy and is
not aiming at profit. But commercial banks were started
mainly to earn profit. Thus ,there are contradicting
objectives between central bank & commercial banks.

15. In this situation, the central bank may find it difficult to
implement its policies when the commercial banks oppose
them. Therefore, in the interest of coordination and
cooperation between them, commercial banks were
nationalised.

16. PROS OF
NATIONALISATION
 Expansion in rural areas.
 Enhancement of trust among common masses in banking as
Government owned banks were unlikely to fail or fool them.
 Extension of banking services to common man.
 Creation and extension of sector specific loans and
advances.
 The direct cash transfer is being implemented and shall be
done on even a larger scale after the availability of basics
savings account services to poorest of the poor.

17. PROS OF
NATIONALISATION
 The trust of the common masses has led to huge
deposits in banks. These funds fuel the growth of
needful agriculture, services, industries etc.

18. CONS OF
NATIONALISATION
 Lack of professional attitudes in banking professionals
in Government owned banks as they do not benefit
from the business of the bank.
 Corruption in banks on officers part due to their power
to sanction advances and loans which leads to NPA(Non
Performing Assets).
 The salaries and compensation of banking professionals
is low. The old staff is untrained in new workings of the
bank. This leads to poor services.

19. CONS OF
NATIONALISATION
 Government pressure from the top for implementing
even loss making schemes or full waiver of loans for
electoral benefits is largely responsible for NPAs.
 Govt support and corruption on the top level means
that big defaulters like Vijay Mallya go scott free.
 A Govt owned bank lacks initiatives to make more
profits as the employees and management are unlikely
to benefit from it.

20. THANK YOU….