3.[B] Observed the picture and answer the following questions
SBI
marks)
1) why was nationalisation of bank essential?
2) How many banks were nationlised in the year 1969?
3) Which banks was nationalised and converted into SBI?
4) who supported the demand for nationalisation of commercia banks?
Answers
Answer:
Explanation:
Nationalisation is a process by which the government takes over private assets and brings them under public ownership.
It’s the opposite of privatisation.
Nationalisation is not considered a part of a socialist agenda as it has been carried out for various purposes under different political and social systems. However, most capitalists are against nationalisation as it is perceived as excessive government interference in, and control of, economic affairs of individual citizens.
What does the term 'Nationalization of Banks' really mean?
Before I answer this question let’s look at the events leading up to it.
The partition of India in 1947 adversely impacted the economies of Punjab and West Bengal, paralysing banking activities for months.
In response, the Government of India initiated measures to play an active role in the economic life of the nation, and the Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed economy.
This resulted in greater involvement of the state in different segments of the economy including banking and finance. The major steps to regulate banking included:
The Reserve Bank of India was nationalised under the terms of the Reserve Bank of India (Transfer to Public Ownership) Act, 1948
The Banking Regulations Act was enacted, which empowered the RBI "...to regulate, control, and inspect the banks in India."
But most importantly The Banking Regulation Act also provided that no new bank or branch of an existing bank could be opened without a license from the RBI, and no two banks could have common directors.
Despite the provisions, control and regulations of the RBI, banks in India except the State Bank of India, remained owned and operated by private persons.
By the 1960s, the Indian banking industry had become an important tool to facilitate the development of the Indian Economy.
And then, it happened.
Indira Gandhi announced the nationalization of fourteen banks in 1969.
In her broadcast to the nation on the eve of nationalisation of the fourteen leading Indian banks, she summed up the objectives of the nationalisation as, "The present decision to nationalise major banks is to accelerate the achievements of our objectives.”
The major objectives were as follows:
Social Welfare : It was the need of the hour to direct the funds for the needy and required sectors of the indian economy. Sector such as agriculture, small and village industries were in need of funds for their expansion and further economic development.
Controlling Private Monopolies : Prior to nationalisation many banks were controlled by private business houses and corporate families. It was necessary to check these monopolies in order to ensure a smooth supply of credit to socially desirable sections.
Expansion of Banking : In a large country like India the numbers of banks existing those days were certainly inadequate. It was necessary to spread banking across the country. It could be done through expanding banking network (by opening new bank branches) in the un-banked areas.
Reducing Regional Imbalance : In a country like India where we have a urban-rural divide; it was necessary for banks to go in the rural areas where the banking facilities were not available. In order to reduce this regional imbalance nationalisation was justified:
Priority Sector Lending : In India, the agriculture sector and its allied activities were the largest contributor to the national income. Thus these were labeled as the priority sectors. But unfortunately they were deprived of their due share in the credit. Nationalisation was urgently needed for catering funds to them.
Developing Banking Habits : In India more than 70% population used to stay in rural areas. It was necessary to develop the banking habit among such a large population.
What has been the impact of nationalization of banks on the Indian Economy?
Bank nationalization, in effect promised a redistribution of credit away from large and medium industrial and business houses to what came to be known as the priority sector: small-scale industry, small traders and entrepreneurs and, supposedly most crucially, agriculture.
It was promised early on that this would be effected primarily through two instruments: