evolution of indian banking system

NATIONALIZATION

SUBMITTED BY: AMAN SHAH

GARIMA VERMA

JANHAVI

JATIN MITTAL

SUDARSHAN

EVOLUTION OF INDIAN BANKING SYSTEM

Reserve Bank of India:

1. Initially established in 1935

2. Transfer to Public Ownership in 1949

Three phases of Indian Banking System:

1. Early phase (1935 – 1969)

2. Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms.

3. New phase with the advent of Indian Financial & Banking Sector Reforms (post-1991).

NATIONALIZATION

Nationalization is the process of taking a private industry or private assets into public ownership by a national government or state

14 banks nationalized in 1969

6 banks nationalized in 1980

Steps taken by the Government of India to Regulate Banking Institutions in the Country:

1. 1949 : Enactment of Banking Regulation Act.

2. 1955 : Nationalisation of State Bank of India.

3. 1959 : Nationalisation of SBI subsidiaries.

4. 1961 : Insurance cover extended to deposits.

5. 1969 : Nationalisation of 14 major banks.

NEED FOR NATIONALIZATION

Private commercial banks were not fulfilling the social and developmental goals of banking which are so essential for any industrialising country.

Despite the enactment of the Banking Regulation Act in 1949 and the nationalisation of the largest bank, the State Bank of India, in 1955, the expansion of commercial banking had largely excluded rural areas and small-scale borrowers.

1969

Public has lesser confidence in the banks.

Led to slower deposit mobilization.

Savings bank facility provided by the Postal department was comparatively safer.

Moreover, loans were largely given to traders.

2013

After nationalisation, public sector bank branches rose to approximately 800% in deposits and advances took a huge jump by 11,000%.

Banks with Government ownership gave the public implicit faith and immense confidence about the sustainability of these institutions.

After 1991 reforms and technological up gradation of the banks, the situation is such that the country is flooded with foreign banks and their ATM stations.

Efforts are being put to give a satisfactory service to customers.

Phone banking and net banking is introduced. The entire system became more convenient and swift. 

EFFECTS OF NATIONALIZATION

Increase in number of branches

More concentration of banks in rural, unbanked and under banked areas

Increase in deposits, lendings

Priority sector lendings were introduced.

BRANCH EXPANSION

As a result of nationalization, the number of bank branches increased rapidly

8262 branches (July 1969) to 64980 (June 1999), 68339 (June 2005) and 71839 (March 2007)

Out of all bank offices, Rural banks made up:

1. 22.4% in June 1969

2. 50.5% in June 1999

Breakdown of bank branch structure in June 2005:

1. Rural: 47.0%

2. Semi Urban: 22.5%

3. Urban: 16.8%

4. Metropolitan: 13.7%

2012:

1. No. of branches in India: 101261

2. No. of commercial banks – 173 (scheduled: 169, non scheduled: 4)

3. RRB branches: 82

INCREASE IN DEPOSITS

Expansion of banking system led to increase in the amount of deposits.

1969:

1. Deposits: 4880 crore rupees

2012:

1. Aggregate Deposits in SCB 59090 billions: 59.09 lakh crore

LENDINGS

We can also see an increase in loans after the reform period

1969:

1. Loans: 3,06,829 lakh rupees

2013:

1. 919189 Crore Rupees

It is increasing at the rate of 10-15% per year since the nationalization.

CREDIT

1969:

1. 3,64,847 lakh rupees

2012:

1. 46,11,800 Crore rupees

PRIORITY SECTOR LENDINGS

PRIORITY SECTOR LENDINGS

SCB loan to priority sector 14710 billion = 14.7 lakh crore

Share of priority sector advances = 29%