About the merits and demerits of Nationalised Banks
Published on: Mar 3, 2016
Transcripts - Nationalised banks
SNEHA NAYAK(MBA- D2F-01)
Submitted to-Prof.Abhinav Jog
The process of transferring ownership and
operational rights of a bank from private or
trusts to the government of the country.
In India,14 leading banks were nationalized on
July 18, 1969.
Each one’s deposits were more than Rs 50 cr.
Their share in total deposits and advances were
almost two third of all scheduled banks in nation
To reduce concentration of economic powers
with only a few industrial magnets and to
Mobilize resources even from backward and rural
To prevent corruption and misuse of firms:
The trustees were only benefiting from huge
resources and it was at the cost of general
development in the country.
To provide aid to the poor, small artisans and
small scale industries. Small scale industries
contributed 40% of industrial output but
received only 4% of bank funds.
To fulfil credit needs of farmers: hardly 2.2%
of funds were available for agriculture.
Removal of barriers- There were no longer any
barriers, social, economic or political between
the bankers and customers. This enabled in a
massive quantitative expansion in customer base
and also helped improve the services
Enabled the bank to widen its growth- There
was no more concern for profitability and there
was expansion in the rural areas. With this the
economy also expanded and employment
opportunities were created.
Expansion of branch network- During the last
28 years of nationalization, the branches of the
public sector banks rose 800 per cent from 7,219
to 57,000, with deposits and advances taking a
huge jump by 11,000 per cent and 9,000 per
Reorientation of bank lending- accelerated the
process of development, especially of the
priority sectors of the economy, which had not
previously received sufficient attention from the
Increased expenditure : Due to huge expansion
in a branch network, large staff administrative
expenditure, trade union struggle, etc. banks
expenditure increased to a dangerous levels.
Limited resources mobilized and allocated :
The resources mobilized after the
nationalization is not sufficient if we consider
the needs of the Indian economy. Some times the
deposits mobilized are enough but the resource
allocation is not as per the expansions
Inadequate banking facilities : Even though
banks have spread across the country; still many
parts of the country are unbanked. Especially in
the backward states such as the Uttar Pradesh,
Madhya Pradesh, Chhattisgarh and north-eastern
states of India.
Lowered efficiency and profits : After
nationalization banks went in the government
sector. Many times political forces pressurized
them. Banking was not done on a professional
and ethical grounds. It resulted into lower
efficiency and poor profitability of banks