1. Explain the origin & development of banking in India. ���� Banking was in existence in India during the Vedic times (2000 BC to 1400 BC). Money lending was regarded as an old art and was practiced in the early Aryan days. ���� Rina (debt) is often mentioned in the �Rig Veda� reflecting a normal condition prevalent in the Vedic Society. ���� The transition from money-lending to banking must have occurred before Manu-he states that a sensible man should deposit his money with a person of good family, good conduct, well-acquainted with law, wealth and honorable. ���� There are references to lending and banking in the two epics namely Ramayana & Mahabharata. During that period banking had become a full fledged business More details pertaining to money lending in the Sutra period (7th century to 2 century) are available from the Jatakas (Buddhist writings). Jatakas establish the existence of seths (money lenders) and contain several stories of Kings receiving financial help from the guilds. From these accounts it is evident that money lending, banking and trading were interlinked. In the Buddhist period even the Brahmins & Kshatriyas started taking banking as a business. Bills of exchange came into use in this period. nd
���� The banking business was being carried out even in the Smriti period and the Smritis explained the methods of regulation of interest. ���� The tradition from money-lending to banking appears to have taken place in the 2nd or 3rd century AD. During This period, people were enjoined upon to make deposits with respectable bankers. This period is characterized as one in which the activities of the bankers/money lenders were well controlled and regulated. Rules for safeguarding the interest of borrowers were introduced. ���� Kautilya in his Arthashastra which was written in the Maurya period in the 4th century mentioned the maximum rate of interest which could be charged by the lenders. The bankers during this period was known as Shakuras and Mahajans ���� There is no live account of indigenous banking from the 6th to 16th century but some stray evidence is found. ���� During the Moghul period indigenous banking was in its prime. There was hardly any village without its money-lender or Sharoff who financed trade and commerce. The system of currency and coinage rendered money lending a highly profitable business. The British came to India in the 17th century. The East India company established its Agency houses in Bombay, Calcutta & Madras. These agency houses were the combination of trade & banking in India. Bank of Hindustan- Appendage of Alexander & Co.1st bank under European direction Established in 1771 at Cal. Collapsed due to failure of parent company Bengal bank was established in 1784 General Bank of India was established in 1786. It was the 1st joint stock company with limited liability
Presidency banks were established in Calcutta, Bombay & Madras. It amalgamated into the Imperial bank in 1921. In 1865 Allahabad Bank was set up under European management In 1875 Alliance Bank of Shimla was started Oudh Commercial bank was the 1st purely Indian management joint bank. Swadeshi movement stated in 1905 and the period from 1906 to 1913 was a period of boom for Indian Banking. The Bank of Burma was established in 1904. Bank of India, Bank of Rangoon & Indian Specie Bank was established in 1906 Some of the important banks which were established later were Bank of India, Central Bank of India, Bank of Baroda, etc.
2. What are the objectives & achievements of bank nationalization in India? Objectives������������������������� According to the Banking Companies Act, 1970, the aim of nationalization of banks in India is �to control the heights of the economy and to meet progressively and serve better the needs of development of the economy in conformity with national policy and objectives.�
1. The elimination of concentration of economic power in the hands of a few 2. diversification of the flow of bank economic credit towards priority sectors such as agriculture, small industry and exports, weaker sections and backward areas
3. fostering of new classes of entrepreneurs, so as to create, sustain and accelerate economic growth
4. professionalisation of bank management 5. providing adequate training as well as reasonable terms of service to bank staff 6. extending banking facilities to unbanked rural areas and semi rural areas to mobilize savings of people to the largest possible extent and to utilize for productive purposes
7. to curb the use of bank credit for speculative and other unproductive purposes 8. to bring banks under the control of RBI Achievements ������������������������������������� �
1. Accelerated branch expansion in rural and backward regions- in 1969 bank branches in rural areas accounted to only 22.5% of the total number of branches. Today branches in rural areas account to 52%
2. Deposit mobilization-after nationalization banks attract deposits from different sections by means of attractive deposit schemes
3. Finance to priority sectors- In 1969 the total credit given to priority sectors like agriculture, small industries and rural development was only 2% of total bank credit. By 2006-2007 in increased to around 40% of total credit
4. Increase in total transactions-the total deposits which was 4,664 crores in 1969 increased to 38.30 trillion
5. Differential rate of interest-to provide credit to weaker sections of the society at very low rate of interest, banks came out with Differential Rate of Interest scheme in 1972
6. Profit making-after nationalization, banks are making profits in addition to achieving economic and social objectives.
7. Safety-the government has given importance to safety of the banks. The RBI exercises tight control over banks and safeguards depositors interest
8. Developmental functions- after nationalization, banks provide assistance for the progress of agriculture, rural development, industry, trade and other developmental plans of the government
9. Advances under self-employment scheme-public sector banks play a significant role in promoting self employment through advances to unemployed through various schemes of the government like IRDP,JGSY, etc
3. State the argument for & against nationalization For�������
1. It would enable the government to obtain all the large profits of the banks as its revenue
2. Nationalization would safeguard interests of public and increase their confidence thereby bringing about a rapid increase in deposits. Thus preventing bank failures
3. It would remove the concentration of economic power in the hands of a few industrialists
4. It would help in stabilizing the price levels by eliminating artificial scarcity of essential goods
5. It would enable the baking sector to diversify its resources for the benefit of the priority sector.
6. Eliminates wasteful competition and raises the efficiency of the working of banks
7. enables rapid increase in the number of banking offices in rural & semi-urban areas & helped considerably in deposit mobilization to a great extent
8. necessary for the furtherance of socialism and in the interest of community 9. Enables the Reserve Bank to implement its monetary policy more effectively 10. It would replace the profit motive with service motive 11. It would secure standardization of banking services in the country 12. Would check the incidence of tax evasion and black money 13. Through pubic ownership and control, banks function like other public utility services by catering to the financial need of the common man.
14. Like other countries, India should also get profit by nationalizing her banking industry.
