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17/12/2013

1-33

1
Social Control and
Nationalization of Banks
Vasanth Kumar.C
Jr,M.Sc(Agri )
Dept of Agril. Economics
UAS GKVK Bangalore
17-...
S
O
C
I
A
L

Banking Scenario Prior to
Nationalization
The private sector banks being predominantly urban
oriented and con...
S
O
C
I
A
L

The bulk of the deposits mobilized
was advanced to the industry
sector and the priority sector
agriculture re...
S
O
C
I
A
L

The social control scheme
Reconstitution of Board of Directors –i.e.51% of them should
have specialized knowl...
S
O
C
I
A
L
C
O
N
T
R
O
L

The scheme also provided for take over of banks by the Govt.
under certain circumstances.
Natio...
S
O
C
I
A
L

Situation after social control scheme
Created the tempo of branch expansion initially.
No significant achieve...
S
O
C
I
A
L
C
O
N
T
R
O
L

The consequent impact
The Government believed that social control was
not sufficient to make th...
S
O
C
I
A
L
C
O
N
T
R
O
L

The Remedial move
Demand for nationalization of commercial banks was
raised quite frequently in...
Brief History of Indian Banking
Before the enforcement of Banking Regulation Act,1949
there was little control and regulat...
N
A
T
I
O
N
A
L
I
Z
A
T
I
O
N

Nationalization of Banks
Promulgation of

the banking companies (Acquisition and

Transfer ...
N
A
T
I
O
N
A
L
I
Z
A
T
I
O
N

 The difference between social control and
nationalization is that in nationalization both...
N
A
T
I
O
N
A
L
I
Z
A
T
I
O
N

The main objectives of Nationalization
As set out by the then prime minister, smt.Indira Ga...
N
A
T
I
O
N
A
L
I
Z
A
T
I
O
N

Expansion of credit to priority areas which were grossly
neglected like agriculture and sma...
N
A
T
I
O
N
A
L
I
Z
A
T
I
O
N

Developing Banking Habits : In India more than 70%
population used to stay in rural areas. ...
N
A
T
I
O
N
A
L
I
Z
A
T
I
O
N

14 Nationalized banks (1st spell)
1.central bank of India
2.Bank of India
3.Punjab National...
N
A
T
I
O
N
A
L
I
Z
A
T
I
O
N

5. United commercial Bank
6.Canara Bank
7. United Bank of India
8.Dena Bank

17/12/2013

17...
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9.Union Bank

10.Allahabad Bank

11.Syndicate Bank
17/12/2013

18-33

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N
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Z
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12.Indian Bank

13.Bank of Maharashtra
14.Indian overseas bank
The 14 Banks together had 4,...
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A
T
I
O
N
A
L
I
Z
A
T
I
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N

After 1st spell of Nationalization
Between June 1969 and June 1975, 8,755 offices were
open...
N
A
T
I
O
N
A
L
I
Z
A
T
I
O
N

Second spell of Nationalization
Encouraged by the success of first spell of
nationalizatio...
N
A
T
I
O
N
A
L
I
Z
A
T
I
O
N

3.New Bank of India
4.Vijaya Bank
5.Oriental Bank of Commerce
6.Corporation Bank
In 1993,Th...
N
A
T
I
O
N
A
L
I
Z
A
T
I
O
N

17/12/2013

23-33

23
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Arguments in favour of nationalization
of banks in India
Prevention of trade cycles: a/c to...
N
A
T
I
O
N
A
L
I
Z
A
T
I
O
N

Improvement in efficiency.
Socialistic pattern of society.
Effective economic planning.
Sec...
N
A
T
I
O
N
A
L
I
Z
A
T
I
O
N

Arguments against nationalisation of
banks
Lack of able, efficient and experienced
employee...
N
A
T
I
O
N
A
L
I
Z
A
T
I
O
N

Achievements of nationalized
banks
The main achievements of the nationalized banks
 Expans...
N
A
T
I
O
N
A
L
I
Z
A
T
I
O
N

Failures of nationalized banks
 Deterioration in the services of the banks.
Failure to mo...
N
A
T
I
O
N
A
L
I
Z
A
T
I
O
N

Evolution Stages

17/12/2013

29-33

29
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Banks in agricultural sector
 Nationalization of banks was a major step
for channelizing c...
N
A
T
I
O
N
A
L
I
Z
A
T
I
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N

Flow of credit to Agriculture

The target for agricultural credit in
2013-14 is Rs7,00,000...
R
E
F
E
R
E
N
C
E
S

References
http://indiabudget.nihttp
http://finance.indiamart.com
http://www.rbi.org.in
http://www.ep...
T
H
E

THANK YOU

E
N
D

17/12/2013

33-33

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Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 1 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 2 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 3 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 4 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 5 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 6 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 7 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 8 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 9 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 10 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 11 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 12 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 13 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 14 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 15 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 16 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 17 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 18 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 19 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 20 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 21 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 22 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 23 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 24 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 25 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 26 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 27 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 28 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 29 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 30 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 31 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 32 Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore Slide 33
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Social control and nationalization of banks. pptx.vasanth gowda uas gkvk bangalore

  1. 1. 17/12/2013 1-33 1
  2. 2. Social Control and Nationalization of Banks Vasanth Kumar.C Jr,M.Sc(Agri ) Dept of Agril. Economics UAS GKVK Bangalore 17-12-2013 17/12/2013 2-33 2
  3. 3. S O C I A L Banking Scenario Prior to Nationalization The private sector banks being predominantly urban oriented and controlled by few large industrialists C O N T R O L were not properly equipped to help the achievement of the basic socio-economic objectives. The credit needs of agriculture ,small scale industries and weaker sections were totally neglected. 17/12/2013 3-33 3
  4. 4. S O C I A L The bulk of the deposits mobilized was advanced to the industry sector and the priority sector agriculture received barely 1%. In absence of financial institutional C O N T R O L protection, the agricultural credit scene was dominated by private moneylenders charging exorbitant rate of interest. All these compelled the imposition of social control over banks in 17/12/2013 4-33 4
  5. 5. S O C I A L The social control scheme Reconstitution of Board of Directors –i.e.51% of them should have specialized knowledge on accountancy,agriculture,rural economy ,banking, cooperation, economics, finance,law,small C O N T R O L scale industries and other matters useful to the banking company. Appointment of a whole time chairman. Imposition of restriction on loans to be granted to the director’s concern. 17/12/2013 5-33 5
  6. 6. S O C I A L C O N T R O L The scheme also provided for take over of banks by the Govt. under certain circumstances. National credit council was setup to perform certain specific functions relating to credit to priority sector. The major objectives, wider spread of bank credit, directing large volume of credit flow to the priority sector and reducing the authority of the members of the managing committee ,since they acted as the representatives of the industrialists. 17/12/2013 6-33 6
  7. 7. S O C I A L Situation after social control scheme Created the tempo of branch expansion initially. No significant achievement was made in channelizing adequate credit to the priority and weaker sections. C O N T R O L In many banks, the policies were controlled by those ,who had controlled these banks earlier. The directions issued by the Government were ignored by many banks. 17/12/2013 7-33 7
  8. 8. S O C I A L C O N T R O L The consequent impact The Government believed that social control was not sufficient to make the commercial banking system meaningful for socio economic development. Bank nationalization was considered as the alternative solution. 17/12/2013 8-33 8
  9. 9. S O C I A L C O N T R O L The Remedial move Demand for nationalization of commercial banks was raised quite frequently in the past. 12 point programme was placed in the Bhubaneswar session of the congress party in 1964 to mitigate the entire range of economic and Social evils. The Govt. did not accept that due to administrative difficulties and other consequential effects in the economy.However,social control was introduced on 1 st February,1969 through the enforcement of legislative measures. 17/12/2013 9-33 9
  10. 10. Brief History of Indian Banking Before the enforcement of Banking Regulation Act,1949 there was little control and regulation on banking business. Results:Mushrooming Growth of public banking companies. Gradual liquidation of the act results-closure and liquidation, Amalgamation of the banks into another. Failure of the Palai central Bank in 1960-A turning point in the Indian Banking Scenario. 17/12/2013 10-33 10
  11. 11. N A T I O N A L I Z A T I O N Nationalization of Banks Promulgation of the banking companies (Acquisition and Transfer of undertaking) ordinance 1969. on July 19,1969 under which 14 commercial banks with deposits over Rs.50 crore each were Nationalized. When the government of any country takes the ownership of any industry or enterprise in its own hand, then this process is known as nationalization. The term social control does not mean nationalization of the banks. 17/12/2013 11-33 11
  12. 12. N A T I O N A L I Z A T I O N  The difference between social control and nationalization is that in nationalization both the ownership and control are taken up by the government, while in social control ownership does not rest in the government.  Social control implies restricted freedom to the bankers, it will give more powers to the central government and credit will be regulated for the social welfare. 17/12/2013 12-33 12
  13. 13. N A T I O N A L I Z A T I O N The main objectives of Nationalization As set out by the then prime minister, smt.Indira Gandhi, were Removal of control on banking business by a few industrialists: Prior to nationalization 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. Elimination of the use of bank credit for speculative and unproductive purposes. 17/12/2013 13-33 13
  14. 14. N A T I O N A L I Z A T I O N Expansion of credit to priority areas which were grossly neglected like agriculture and small scale industries. Giving a professional bent to the bank management . Encouragement of new classes of entrepreneurs. Provision of adequate training as well as reasonable terms of service to bank staff. 17/12/2013 14-33 14
  15. 15. N A T I O N A L I Z A T I O N 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. Reducing Regional Imbalance : In 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 nationalization was justified 17/12/2013 15-33 15
  16. 16. N A T I O N A L I Z A T I O N 14 Nationalized banks (1st spell) 1.central bank of India 2.Bank of India 3.Punjab National Bank 4.Bank of Baroda 17/12/2013 16-33 16
  17. 17. N A T I O N A L I Z A T I O N 5. United commercial Bank 6.Canara Bank 7. United Bank of India 8.Dena Bank 17/12/2013 17-33 17
  18. 18. N A T I O N A L I Z A T I O N 9.Union Bank 10.Allahabad Bank 11.Syndicate Bank 17/12/2013 18-33 18
  19. 19. N A T I O N A L I Z A T I O N 12.Indian Bank 13.Bank of Maharashtra 14.Indian overseas bank The 14 Banks together had 4,134 Baranches with deposits of Rs.2,626 crore and advances of Rs.1,813 crore. 17/12/2013 19-33 19
  20. 20. N A T I O N A L I Z A T I O N After 1st spell of Nationalization Between June 1969 and June 1975, 8,755 offices were opened by public sector banks, of which 4,337 offices were in urban areas. The number of public sector bank offices went up from 6,596 in June 1969 to 15,077 in June 1975. The average population served per bank branch declined markedly from 65,000 in June, 1969 to 32,000 by June, 1975. 17/12/2013 20-33 20
  21. 21. N A T I O N A L I Z A T I O N Second spell of Nationalization Encouraged by the success of first spell of nationalization of banks, six more banks in the private sector, having deposits more than Rs.200 crore were nationalized on 15th April 1980. The six banks were, 1.Punjab & Sind Bank 2.Andhra Bank 17/12/2013 21-33 21
  22. 22. N A T I O N A L I Z A T I O N 3.New Bank of India 4.Vijaya Bank 5.Oriental Bank of Commerce 6.Corporation Bank In 1993,The New Bank Of India was merged with Punjab national Bank consequent to which Nationalized Banks stands as on Today 19. 22 17/12/2013 22-33
  23. 23. N A T I O N A L I Z A T I O N 17/12/2013 23-33 23
  24. 24. N A T I O N A L I Z A T I O N Arguments in favour of nationalization of banks in India Prevention of trade cycles: a/c to Keynes, banks plays a very important role at the time of boom (or) depression. The boom and depression follow each other at regular intervals. fluctuations harm to the economy of the country. it is essential to exercise control on these business fluctuations in the interest of the healthy development of the economy the government can keep the effective control on the volume of credit only if the banks are nationalized. 17/12/2013 24-33 24
  25. 25. N A T I O N A L I Z A T I O N Improvement in efficiency. Socialistic pattern of society. Effective economic planning. Security to depositors. Removal of inter bank competition. Utilization of bank credit in national interests. Encouragements to savings. Utilization of banks profit in national interests Development of specialized banks. 17/12/2013 25-33 25
  26. 26. N A T I O N A L I Z A T I O N Arguments against nationalisation of banks Lack of able, efficient and experienced employees. Adverse effects on the development of private sector. Lack of financial secrecy. 17/12/2013 26-33 26
  27. 27. N A T I O N A L I Z A T I O N Achievements of nationalized banks The main achievements of the nationalized banks  Expansion of bank branches  Financial accommodation to the neglected sections  Financial accommodation to the unemployed youth.  Loans to sick industrial undertakings  District survey for banking development 17/12/2013 27-33 27
  28. 28. N A T I O N A L I Z A T I O N Failures of nationalized banks  Deterioration in the services of the banks. Failure to mobilize adequate deposits Failure to provide competent and efficient bank staff Neglect the priority sectors 17/12/2013 28-33 28
  29. 29. N A T I O N A L I Z A T I O N Evolution Stages 17/12/2013 29-33 29
  30. 30. N A T I O N A L I Z A T I O N Banks in agricultural sector  Nationalization of banks was a major step for channelizing credit to various sectors of economy of which agriculture is a major sector.  A dynamic and growing agricultural sector needs adequate finance through banks to accelerate the overall growth. 17/12/2013 30-33 30
  31. 31. N A T I O N A L I Z A T I O N Flow of credit to Agriculture The target for agricultural credit in 2013-14 is Rs7,00,000 crore. 17/12/2013 31-33 31
  32. 32. R E F E R E N C E S References http://indiabudget.nihttp http://finance.indiamart.com http://www.rbi.org.in http://www.epw.in http://www.hindu.com https://www.youtube.com http://www.preservearticles.com 17/12/2013 32-33 32
  33. 33. T H E THANK YOU E N D 17/12/2013 33-33 33
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Social control and Nationalisation of banks ppt , prepared and shared by, Vasanth kumar c Department of Agricltural economics Uas Gkvk Bangalore

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