DEPARTMENT OF TECHNICAL

EDUCATION ANDHRA PRADESH

Name : P. Samba Murthy,
Designation : Head of Department

Branch : D.C.C.P.
Institute : S.R.R.S. Govt. Polytechnic,
Sircilla, Karimnagar District
Year/Semester : V Semester
Subject : Banking – I
Subject Code : CCP- 504(B)
Topic : Indian Banking Industry- Growth
Duration : 50 Minutes
Sub-Topic : Need for Privatisation and
Globalistion
Teaching Aids : PPTCCP504(B).28 1
Objective

 On the Completion of this Period , you would be

able to :

 Understand the need of Privatisation of Banks

CCP504(B).28 2
Introduction

 Privatisation is a process by which the Government

transfers the productive activity from the Public
Sector to the Private sector.

 Many countries in the world have launched

massive programmes of Privatization.

CCP504(B).28 3
PRIVITISATION

 Keeping in view the prevailing circumstances in

the world, the Reserve Bank of India is also
encouraging private banks and foreign banks
which are playing a dominant role.
 And also carrying out Privatisation as a condition
for assistance under the economic stabilization.

CCP504(B).28 4
Arguments in favour of Privatization

INCREASES EFFICIENCY AND COMPETITION

 In the new atmosphere of Liberalization and

Globalization of the Indian economy, privatization
of banks is necessary because it will promote
efficiency and competition in the Financial
System.

CCP504(B).28 5
Arguments in favour of Privatization

 NO POLITICAL INTERFERENCE:
 Unnecessary political interference will nit impairs the
smooth working of these Institutions.
 EFFICIENT SUPERVISION:
 Malpractices of Private – owned banks can be checked
by adopting appropriate monetary and fiscal measure
through efficient supervision by the Reserve Bank of
India.

CCP504(B).28 6
Arguments In Favour of Privatisation
 SOCIAL WELFARE
 The objective of social welfare may not be
achieved through nationalization of banks.
 State capitalization is not Socialism.
 MISUSE OF NATIONAL PROPERTY
 Moreover, there is a general feeling in India to
treat public property or funds not as sacred
national property but as no one’s property
 Therefore, it is misused and destroyed like
anything.
CCP504(B).28 7
Arguments Infavour of Privatisation

 AGAINST ECONOMIC VIABILITY;

 Extending too much loans to Agriculture and
Small Scale Industries by the Nationalized Banks
is risky and less remunerative.
 Such Loans are against the Sound Banking rules
and may weaken the economic viability of these
Institutions.

CCP504(B).28 8
Arguments in favour of Privatisation
 INCREASES PROFITABILITY:
 Privatization of Banks will generate competing
spirit in the Banking System.
 It Will reduce costs and improve profitability of the
banks.
 Competition among the banks will make the
bankers function more actively with grater
responsibility, thus Increasing discipline in the
banking Sector
CCP504(B).28 9
Arguments in Favor of Privatisation

 PROVIDES BETTER SERVICE TO CUSTOMERS:

 Private Banks will provide quick, better, modern and
new innovative services to their Customers and
promote confidence among them in the banking
Sector.
 ACCELERATE ECONOMIC GROWTH:
 By encouraging savings and investments, Private banks
will promote capital function and thus accelerate
economic growth in the country.
CCP504(B).28 10
Arguments In favour of Privatisation

 GUARANTEE TO CUSTOMERS:
 There is no need to Provide 100% security to the
depositors in India through Nationalization of
Banks.
 Institution like Indian Deposit Insurance and Credit
Guarantee Corporation (DICGC) is working quite
efficiently and provide enough relief to the
Depositors in case of default.

CCP504(B).28 11
Arguments In Favour of Privatisation
 STRICT SUPERVISION BY RBI
 It was not correct to state that Private Banks were
involved in malpractice and did not safeguard the
interest of their Depositors
 The reason being that the Private Banks strictly under
the control of R.B.I

CCP504(B).28 12
Arguments In Favour of Privatisation
 NATIONALISATION OF OTHER SECTORS:
 Nationalization of Commercial Banks alone does
not help the Government is bringing socialistic
pattern or society.
 It must be preceded by the nationalization for
Private Industries such as Cement, Iron and
Steel, Cotton etc.,

CCP504(B).28 13
Arguments in Favour of Privatisation

 NATIONALIZATION INVOLVES FINANCIAL BURDEN

 Nationalization of private Banks involves huge amount
of money to be paid as compensation to the share
holders and employees.
 This puts additional financial burden on the
Government.

CCP504(B).28 14
Arguments In favour of Privatisation

 DECRESEAS POLITICAL INTERFERENCE

 It was Argued that if the Private Commercial Banks are

Nationalized, they promote Greater “Inefficiency”.

 There will not be Political Interference in privatization.

CCP504(B).28 15
Summary
 To take the pragmatic view, under the changed
national and international situation based on free-
market economic system, privatisation and
liberalization are the need of the hour.
 The policies of privatisation and liberalization will
smoothen the operation of the free market
mechanism.

CCP504(B).28 16
Frequently Asked Questions

1) Explain the need for privatisation of banks.

3) What is the role Played by Private banks in

India?

5) Explain the Arguments in Favour of privatization.

CCP504(B).28 17
Quiz
1. Which organization gives deposit Guarantee
Scheme
a) CIC of India
b) SBI
c) RBI
d) DICGC

CCP504(B).28 18