Question

Indian Banking has witnessed major changes starting from nationalization in 1969 of 14

private sector banks again to privatization of banks in 1990s. Year 2014 resulted in

setting of small Payment Banks in different nooks & corners of the country to a

diametrically opposite step of mergers and consolidation of many weak public sector banks with a few large banks in 2018/19. What has been the economic & financial

compulsions/reasons for such changes in five decades?​

Answer 1

Indian Banking

Explanation:

• Nationalization of 14 major lenders accounted for 85 per cent of bank deposits in the country in 1960 s.

• In 1980, six additional banks were nationalized.

• The primary goal of nationalization was to re-energize priority industries at a period when big corporations dominated credit profiles.

• The government of the period thought that banks were failing to serve its socioeconomic goals and that it needed to exert greater control over them.

• Governance, political influence, and, to some extent, competence that may not have kept pace in the field of credit evaluation are the key difficulties with public sector banks (PSBs) in the twenty-first century.

• Aside from political and economic considerations, there were also financial considerations.

• There has long been a perception that Indian banks are unwilling to lend money to agriculture.

• Furthermore, because private banks were controlled by large manufacturers, they lent to themselves.

• The senior bank directors also held directorships in a variety of other sectors, creating a conflict of interest.