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The nationalization of banks in India led to significant changes in the banking sector, including enhanced social control, regional expansion, and focus on priority sectors. State Bank of India emerged as a key player, offering a wide range of financial services. Regional Rural Banks were established to cater to rural credit needs. Private and foreign banks also made their mark, contributing to the diverse banking landscape in the country.
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Banking & Finance - 1 Chapter – 2 Commercial Banking
Banks in Public sector - Nationalization of Banks –The Government in the interest of the public, nationalized banks to put control on the banks as they have the public’s money. Every bank has to change it BOD in such a way that 51% of it’s directors having special knowledge in the field of banking, agriculture, Co-operation small scale and rural economy. Each commercial bank should name a full time chairman having experience and knowledge in field of banking.
The power to appoint and dismiss the chairman is given to the Reserve bank of India. According to Sec. 36 of the Act the following are unlawful – To obstruct any person from entering or leaving the bank for carrying on business. To act in a manner calculated to undermine the interest of the depositors of the bank. Demonstrations which are violent or are calculated to prevent normal transaction of business.
Other reasons for nationalization – 1. Social control over banks 2. Regional Imbalance 3. Credit to priority sector 4. Banking habits 5. Expansion of banking sector 6. Social justice
Progress of Banks after Nationalization 1. Expansion of branches : Growth in branches of commercial Bank after nationalization 2. Branch opening in rural areas : After nationalization, banks are moving towards rural and less developed areas. 3. Credit to priority sector : Commercial banks have been successful in lending to priority sector 4. Deposit mobilization : There has been substantial rise in rate of deposit mobilization.
State Bank of India 1. State bank of India is the largest and oldest bank in India. 2. In terms of Balance sheet size, Market capitalization and number of branches. 3. SBI has Tie up pension funds, General insurance, Custodial services, mobile banking etc. 4. State bank is also providing whole sale banking facilities to large corporates.
SBI Progress : 1. 22,000 Branches 2. 8500 ATMs 3. 82 Foreign offices 4. Branches of Associate Banks – 5100 5. Other value added services – Internet banking, Debit cards, Credit cards, mobile banks.
Regional Rural Banks (RRB) 1. RRBs are those banks which provide credit to weaker sections 2. Group under Narasimham Comittee was appointed to study the rural area credit needs 3. They recommended the establishment of RRBs 4. RBI then introduced RRB Act 1976 5. They cater to the needs of Rural area for credit needs better than commercial banks and Co-operative banks
Banks in Private sector 1. The small size and regional focus, they were not nationalized in 1969 and 1980 phase of nationalization. 2. In 1993 when Banking regulation Act were amended for new economic reform. 3. This permitted new private sector banks to come into the picture
Foreign Banks 1. Foreign banks are banks which incorporated abroad 2. They have their head office abroad 3. They also have branches in India. 4. They form an important segment of banking system in India. 5. They provide the typical facilities provided by commercial Banks
Foreign Banks – 1. ABN-AMRO Bank 2. Bank of Ceylon 3. Standard Chartered Bank 4. Bank of America 5. BNP Paribas 6. Barclays Bank 7. Citibank N.A. 8. HSBC Ltd.
