Nationalisation Vs. Privatisation of Banks

Introduction Nationalised bank refers to government undertaking bank. Nationalisation of banks in India took place in 1969 and 14 commercial banks were nationalised at that time. The main objectives of Nationalisation of Banks are: To mobilise savings and channelise them for productive purposes. To help in effective development of national resources, etc. The supporters of Nationalisation of Banks has given various arguments like it will promote economic development, control monopolistic practices, full utilisation of natural resources, etc. On the other hand, opponents give arguments against nationalisation of banks that it will lead to fall in the efficiency of nationalised banks, this step was taken under political pressure, there is a possibility of losses, etc. The benefits of Nationalisation of Banks has been realized overtime in many ways like in extending small and medium-scale industrial sectors, nationalized banks have worked to benefit society, etc. The critical evaluation of working of nationalized banks reveals that though there is phenomenal increase in the number of bank branches but due to lack of sufficient banking facilities and regional disparities, a lot still needs to be done. Apart from nationalization of banks, the concept of Privatisation of banks was introduced under Banking Companies Amendment Act of 1994. The arguments given in favour of the Privatisation of Banks are: providing lots of freedom in credit decisions will result in high returns and better recoverability, it will create competitive environment, thereby improve the quality of the service, etc.

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