National vs Private Banking in India

BANKBANKNationalization & Privatization

Group Member :Saahil KaraniTrevor Driver

Urvi ShahVaibhav Khare

Vicky GuptaVenus Doshi

Introduction of Structure of Indian Banks

As per Banking Regulation Act, Bank act as an agent who except the deposit of money from the public for the purpose of lending or investment.

Nationalization of BanksNationalization of Banks

Banking System in India is dominated by Nationalized bank.

Banks which are managed and controlled by the government are nationalized bank.

These banks work according to norms of RBI.

Earlier banks were not in the hands of government. They were in the hands of private owners who were high earners of the society. This situation was before 1969.

Prior to 1969Prior to 1969

Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank Indian Bank

Syndicate Bank UCO Bank Union Bank of India United Bank of India Vijaya Bank Indian Overseas Bank Oriental Bank of Commerce Punjab and Sind Bank Punjab National Bank

Reason for NationalizationReason for Nationalization

Commercial banks created monopoly in the country.

The priority sector was neglected. Banks did not pay attention to credit needs to farmers, small scale industries

Management lacked professional expertise.

Resources of banks were misused for benefit of directors.

Bank credit was not made according to five year developmental plans.

This was observed by the then prime minister Indira Gandhi in 1969. She thought that these banks were not working for development of nation. So she thought of taking over banks into government undertaking.

1955: Nationalization of State Bank of India.

1959: Nationalization of 7 SBI subsidiaries.

February 1st1969: Nationalization of 14 major banks with deposit of over 50cr.

1980: Nationalization of seven banks with deposits over 200cr.

Major Point on Which Nationalized Major Point on Which Nationalized Bank WorkBank Work

Equally distribution of bank credit.

To strengthen banking system by preventing bank failure.

To make bank finance available for productive purposes in the priority sectors of the economy.

To extend banking services in rural areas.

To foster new class of entrepreneurs.

Progress of Nationalizes Progress of Nationalizes BankBank

Source: RBISource: RBI

DepositDeposit

Source: RBISource: RBI

Credit

Problems faced after Problems faced after NationalizationNationalization Political interferencePolitical interference

OverstaffingOverstaffing

Inadequate supervision and regulationInadequate supervision and regulation

Lack of CompetitionLack of Competition

Major Frauds

Hindustan Photo Films — Rs. 395 crore Mangalore Chemicals and Fertilizers - Rs. 165 crore JK Synthetics — Rs. 87 crore Harshad Mehta — Rs.812 crore Hyderabad Allwyn — Rs. 85 crore HMT — Rs. 77 crore

Total Fraud was 1621 Crore.

Privatization of Privatization of BanksBanks

What's the Needs of Privatization???

In early 80s, the Banking Sector in India was dominated by the public sector banks which were characterized by

High Intermediation Costs.

Over-staffing and Over-branching.

Huge portfolio of Non performing Loans

Poor Customer Services

Undercapitalized

Poorly Managed / Narrow Product Range

Undue Interference in Lending, Loan Recovery & Personnel

Objective of Privatization

Foster competition,

Ensuring greater capital investment,

Competitiveness and Modernisation,

Increases in Employment

Improved quality of products and services to the consumers

Reduction in the fiscal burden.

Increase in the efficiency levels

Private Sector Banks Bank of Punjab Bank of Rajasthan Catholic Syrian Bank Centurion Bank City Union Bank Dhanalakshmi Bank Development Credit Bank Federal Bank HDFC Bank ICICI Bank IDBI Bank

IndusInd Bank ING Vysya Bank Jammu & Kashmir Bank Karnataka Bank Karur Vysya Bank Laxmi Vilas Bank South Indian Bank United Western Bank UTI Bank (merged with

Axis bank)

Benefits of Privatization

Privatization Benefits

There was a great increase in the no. of bank branches after privatization from 8262 to 45,898.

Branches in rural/semi-urban sectors increases from 2% to 40% after privatization.

Credit to agriculture increases from Rs.162 crore to Rs.4,46,496 crore.

More job opportunities raise after privatization which leads to increase in staff from 2,20,000 to 9,65,720.

Private sector bank loans growth is faster as compared to public sector banks.

There was a great increase in the efficiency of the private banks as the control over bank employees increases.

Private sector banks provide many additional services to its customers.

Cntd…….

Adverse Impacts of Privatization Interest rate is more as compare to the public sector

banks. Private banks are responsible for this recession in the

world & also in India. Less job security. Private recovering agencies to recover bad loans.

Conclusion

There is nothing bad with the public sector banks, the difference is in the policies. Because of loopholes in the policies people uses banks for their personal cause. Private sector banks boost the Indian economy as their efficiency is much more than the Public sector banks. But there is still a long road for privatization.

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