BANK

Nationalization & Privatization

Group Member :
Saahil Karani
Trevor Driver
Urvi Shah
Vaibhav Khare
Vicky Gupta
Venus Doshi
Introduction of Structure of Indian Banks
As per Banking Regulation Act, Bank act as
an agent who except the deposit of money
from the public for the purpose of lending or
investment.
 Nationalization of Banks

 Banking System in India is dominated by Nationalized

bank.
 Banks which are managed and controlled by the
government are nationalized bank.
 These banks work according to norms of RBI.
 Earlier banks were not in the hands of government.
They were in the hands of private owners who were
high earners of the society. This situation was before
1969.
 Prior to 1969
 Allahabad Bank  Syndicate Bank
 Andhra Bank  UCO Bank
 Bank of Baroda  Union Bank of India
 Bank of India  United Bank of India
 Bank of Maharashtra  Vijaya Bank
 Canara Bank  Indian Overseas Bank
 Central Bank of India  Oriental Bank of Commerce
 Corporation Bank  Punjab and Sind Bank
 Dena Bank  Punjab National Bank
 Indian Bank
 Reason for Nationalization
 Commercial banks created monopoly in the country.

 The priority sector was neglected. Banks did not pay attention
to credit needs to farmers, small scale industries
 Management lacked professional expertise.
 Resources of banks were misused for benefit of directors.

 Bank credit was not made according to five year

developmental plans.
This was observed by the
then prime minister Indira
Gandhi in 1969. She
thought that these banks
were not working for
development of nation. So
she thought of taking over
banks into government
undertaking.
 1955: Nationalization of State Bank of India.

 1959: Nationalization of 7 SBI subsidiaries.

 February 1st 1969: Nationalization of 14 major

banks with deposit of over 50cr.

 1980: Nationalization of seven banks with

deposits over 200cr.
Major Point on Which Nationalized
Bank Work

 Equally distribution of bank credit.

 To strengthen banking system by
preventing bank failure.
 To make bank finance available for
productive purposes in the priority sectors
of the economy.
 To extend banking services in rural areas.
 To foster new class of entrepreneurs.
Progress of Nationalizes
Bank

Source: RBI
Deposit Credit

Source: RBI
Problems faced after
Nationalization
 Political interference

 Overstaffing

 Inadequate supervision and regulation

 Lack of Competition
 Major Frauds
 Hindustan Photo Films — Rs. 395 crore
 Mangalore Chemicals and Fertilizers - Rs. 165 crore
 JK Synthetics — Rs. 87 crore
 Harshad Mehta — Rs.812 crore
 Hyderabad Allwyn — Rs. 85 crore
 HMT — Rs. 77 crore

 Total Fraud was 1621 Crore.

Privatization of
Banks
 What's the Needs of Privatization???
In early 80s, the Banking Sector in India was dominated by the
public sector banks which were characterized by

 High Intermediation Costs.

 Over-staffing and Over-branching.
 Huge portfolio of Non performing Loans
 Poor Customer Services
 Undercapitalized
 Poorly Managed / Narrow Product Range
 Undue Interference in Lending, Loan Recovery & Personnel
 Objective of Privatization

 Foster competition,
 Ensuring greater capital investment,
 Competitiveness and Modernisation,
 Increases in Employment
 Improved quality of products and services to the consumers
 Reduction in the fiscal burden.
 Increase in the efficiency levels
 Private Sector Banks
 Bank of Punjab
 Bank of Rajasthan
 Catholic Syrian Bank
 Centurion Bank
 City Union Bank
 Dhanalakshmi Bank
 Development Credit Bank
 Federal Bank
 HDFC Bank
 ICICI Bank
 IDBI Bank
 IndusInd Bank
 ING Vysya Bank
 Jammu & Kashmir Bank
 Karnataka Bank
 Karur Vysya Bank
 Laxmi Vilas Bank
 South Indian Bank
 United Western Bank
 UTI Bank (merged with
Axis bank)
Benefits of Privatization
 Privatization Benefits
 There was a great increase in the no. of bank branches after
privatization from 8262 to 45,898.

 Branches in rural/semi-urban sectors increases from 2% to 40% after

privatization.

 Credit to agriculture increases from Rs.162 crore to Rs.4,46,496 crore.

 More job opportunities raise after privatization which leads to increase

in staff from 2,20,000 to 9,65,720.
 Cntd…….

 Private sector bank loans growth is faster as compared to

public sector banks.

 There was a great increase in the efficiency of the private

banks as the control over bank employees increases.

 Private sector banks provide many additional services to

its customers.
Adverse Impacts of Privatization
 Interest rate is more as compare to the public sector
banks.
 Private banks are responsible for this recession in the
world & also in India.
 Less job security.
 Private recovering agencies to recover bad loans.
 Conclusion
There is nothing bad with the public sector banks, the
difference is in the policies. Because of loopholes in the
policies people uses banks for their personal cause. Private
sector banks boost the Indian economy as their efficiency is
much more than the Public sector banks. But there is still a
long road for privatization.
Thank You