DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : P. Samba Murthy, HCCP
Designation : Head of Department
Branch :D.C.C.P.
Institute : SRRS Govt. Polytechnic, Sircilla
Semester : V - Semester
Subject : Banking – I
Subject Code : CCP – 504 (B)
Topic : Indian Banking Industry–Growth
Duration : 50 minutes
Sub-Topic : Nationalization of Banks
Teaching Aids : PPT
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OBJECTIVES:

 On completion of this period, you would be able

to:
 Understand the arguments in favour of the
nationalization of banks.

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RECAP
 So far we have discussed about the factors which
led for the nationalization of banks in the country.
 So also the reasons for nationalization of banks
which inspired by a larger social purpose and has to
subserve national priorities and objectives.

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ARUGUMENTS IN FAVOUR OF
NATIONALIZATION

 The main arguments in favour of nationalization

of banks in the country are discussed

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Ownership and control in a few hands
 Indian banks were owned and controlled by a
few big shareholders and allocation of bank
credit in accordance with their own interests.

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Concentration of wealth and power

 The banks in India were controlled by a few

industrial houses which used the public funds
of the banks to build up huge industrial estates.

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Failure to mobilize resources

 Private commercial banks had failed to mobilize

the savings of the community, small towns and
lower income groups.

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Discrimination against small
business units and agriculture

 The commercial banks generally favored large

industrial and business units.
 Ignored to finance the small business units and
agriculture sector.

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Misuse of funds

 The funds were used for the hoarding of

essential commodities and for speculation.

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Credit to Directors
 The funds were not utilized for the economic
development of the country but for the promotion
of the interest of the directors.

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Indifference to agricultural sector

 The agricultural sector was almost ignored by the

commercial banks and most of their branches were
existed in the urban areas.

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Financing Economic Plan

 Nationalized banks would make their

resources available to the government for
financing economic plans of the country.

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Safety of depositors

 Nationalization will provide 100 per cent safety

and security to the deposits of the people
which will inspire confidence in the banking
system and thus increase the bank deposits.

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INCREASES EFFICIENCY OF BANKS

 Nationalization eliminates wasteful

competition and raises the efficiency of the
working of the banks.

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UNIFIED CONTROL ON
COMMERCIAL BANKS

Integrated monetary policy and its effective

implementation request unified control of both
the central and commercial banks

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CAN ACHIEVE SOCIALISM

Nationalization of banks is necessary for

achieving socialism;

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SUMMARY:

 The main motive behind nationalization of banks

are like to avoid the concentration of economic
power only in a few hands, to assure public
interest, to use the savings mobilized for the
general economic development and also to protect
the interest of depositors.

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SUMMARY:

 It also played a key role in improving the rate of

savings in the country which enabled to launch
massive programmes of development of industries
and agriculture sectors.

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Frequently asked questions

2) Do you think that the nationalization of banks by

the government of India was a wise move?
Critically examine.
3) Write a note on nationalization.

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