Nationalisation
of Banks
After
Independence, the Government of Indiaadopted planned economic development. For
this purpose, Five Year Plans came into existence since 1951. The main
objective of the economic planning aimed at social welfare. Before Independence
commercial banks were in the private sector. These commercial banks failed in
helping the Government to achieve social objectives of planning. Therefore, the
government decided to nationalize 14 major commercial banks on 19 July 1969. In
1980, again the government took over another 6 commercial banks.
The
Government of India nationalized the commercial banks to achieve the following
objectives.
1.
The main objective of nationalization was to attain
social welfare. Sectors such as agriculture, small and village industries were
in need of funds for their expansion and further economic development.
2.
Nationalisation of banks helped to curb private
monopolies in order to ensure a smooth supply of credit to socially desirable
sections.
3.
In India, nearly 70% of population lived in rural
areas. Therefore it was needed to encourage the banking habit among the rural
population.
4.
Nationalisation of banks was required to reduce the
regional imbalances where the banking facilities were not available.
5.
Before Independence, the numbers of banks were
certainly inadequate. After nationalization, new bank branches were opened in
both rural and urban areas.
6.
Banks created credit facilities mainly to the
agriculture sector and its allied activities after nationalization.
After New
Economic Policy 1991, the Indian banking industry has been facingthe new
horizons of competitions, efficiency and productivity. With all these
developments people in villages and slums depend largely on local money lenders
for their credit need. This is unfortunate.
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