DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : P. Samba Murthy,
Designation : Head of Department

Branch : D.C.C.P.
Institute : S.R.R.S. Govt. Polytechnic,
Sircilla, Karimnagar District
Year/Semester : V Semester
Subject : Banking – I
Subject Code : CCP- 504(B)
Topic : Indian Banking Industry –
Growth
Duration : 50 Minutes
Sub-Topic : Objectives of Nationalization of
Banks
Teaching Aids : PPT CCP504(B).21 1
Objectives

On completion of this period, you would be

able to
 Understand the criticisms on nationalization of
banks.

CCP504(B).21 2
Recap
So Far , We have discussed
 Nationalization of banks is also having strengths
and weaknesses.
 Objectives of Nationalization of Banks.
 Names of the Banks Nationalized in 1969 and
1980.

CCP504(B).21 3
NATIONALIZATION –
CRITISISM

 Nationalization of banks has been criticized by a

number of people mainly on the following
grounds:
 The scheme of social control over banks has not
been given a fair trial.

CCP504(B).21 4
 NATIONALIZATION –
CRITISISM

 Foreign banks and the smaller banks are left out

of the purview of nationalization.
 Public ownership will lead to inefficiency in the
working of banks.
 Nationalization will lead to inefficient functioning
of banks.

CCP504(B).21 5
NATIONALIZATION –
CRITISISM

 The above criticism can best be answered by

pointing out the example of the State Bank of
India.
 The SBI deposits are increased enormously.
 The efficiency of SBI in priority sectors credit is
greater when compared to other Banks.
 This proves that efficiency of an organization
need not necessarily depend on its ownership.

CCP504(B).21 6
 NATIONALIZATION –

CRITISISM
Moreover, professionalisation
of the banking
management is an importance objective under
the new system.
 It has also been made clear that there will be
autonomy for each bank and the boards of
directors will have well-defined powers.
 As such, the public ownership does not mean
the elimination of healthy competition or
initiative.

CCP504(B).21 7
 NATIONALIZATION –
CRITISISM

 Another point can also be added as against the

criticism of leaving out the small banks,
 It has been pointed out that the operations of
small banks are limited to certain specific
regions and with their wider coverage the bigger
banks would be in a better position to implement
Government’s objectives than small banks.

CCP504(B).21 8
 NATIONALIZATION –
CRITISISM

 Answering the criticism that foreign banks are

not included in the legislation,
 It has been observed that they are part of a
world-wide organization and this enables them
to give certain special facilities and service to
exporters and importers.

CCP504(B).21 9
 NATIONALIZATION –
CRITISISM
 There is often a misconception that
nationalization is a peculiarly socialistic
measure.
 The peculiar nature of banking industry which
distinguishes it from other industries has been
the main consideration for many countries to
bring their banking system under public owner-
ship.

CCP504(B).21 10
 NATIONALIZATION –
CRITISISM

 Indeed, the stranglehold of big units of the

private sector on the economy is weakened by
nationalization of banks, and to that extent, the
forces of socialism have been relatively
strengthened.

CCP504(B).21 11
 NATIONALIZATION –
CRITISISM

 Nevertheless, much of the real social content of

nationalization of banks depends on the post-
nationalization policies and operations of the
public sector banks.

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 NATIONALIZATION –
CRITISISM

 Though there are certain merits and demerits

with nationalization of banks in India and
Banking Act is also playing a significant role in
ensuring development of banking system in the
country on sound footing and in proper direction.

CCP504(B).21 13
Provisions of the Banking Act are:

 To protect the interest of the depositors;

 To increase public confidence in the
banking system;

CCP504(B).21 14
Provisions of the Banking Act are:

 To check frequent failure of banks;

 To empower the Reserve Bank to regulate the
growth and operations of banks.

CCP504(B).21 15
Provisions of the Banking Act are:

 With the nationalization of banks almost the

whole banking system of the country has come
under the direct control of the Government.
 Therefore, under the changed circumstances,
there is not much need of most of the provisions
of the Banking Regulation Act.

CCP504(B).21 16
Summary
 There have been remarkable changes in the
banking sector after nationalization of major
banks though several distortions crept into the
system.
 However, productivity and efficiency has to be
improved from time to time reviewing the
prevailing circumstances.

CCP504(B).21 17
Frequently Asked Questions
1) Do you consider the nationalization of banks to
have been a success in India?
2) On what grounds the Nationalization of banks
has been assailed by a number of people?
3) Mention the various provisions of the Banking
Act.

CCP504(B).21 18