Question

What are the objectives of nationalised banks in india?

Answer 1

Nationalisation of Banks in India - Introduction Objectives Demerits, article ... its allied activities were the largest contributor to the national income.

Answer 2

Objectives Behind Nationalization of Banks in India :

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 nationalization 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 labelled as the priority sectors. But unfortunately they were deprived of their due share in the credit. Nationalization 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.

Monetisation issue: Commercial banks accumulate deposits from the public. Therefore, they are in a position to bring changes in the supply of money. Such an important power should not be in the private sector. It is the public sector that should have the control over money supply.

Integration issue: Central Banks are established by the Govt, for overall monetary control in the economy and is not aiming at profit. But commercial banks were started mainly to earn profit. Thus, there are contradicting objectives between Central Bank and commercial banks. In this situation, the Central Bank may find it difficult to implement its policies when the commercial banks oppose them. Therefore, in the interest of coordination and cooperation between them, commercial banks were nationalized.