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Bank Nationalization In India

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Bank Nationalization in India

The commercial banks of India prior to 1969 were private sector banks. The banks were controlled by some individuals or industrial establishments. Their only motive was to provide credit to large industries and earn profit. It is for this reason that the bank businesses were centralized in industrial or urban areas. The agriculture, small industries and cottage industries were deprived of the facility of bank credit. As bank businesses were not profitable in the rural areas, such areas could not receive banking services. The State Bank of India has become the largest commercial bank of the country.

On July 19, 1969, 14 commercial banks of India were nationalized. The objectives behind the nationalization of …show more content…

In General sense,
"Development banks are those financial institutions whose prime goal (motive) is to finance the primary (basic) needs of the society. Such funding results in the growth and development of social and economic sectors of the nation. However, needs of the society vary from region to region due to differences seen in its communal structure, economy and other aspects."
2. As per Banking subject (mainly in Indian context),
"Development banks are financial institutions established to lend (loan) finance (money) on subsidized interest rate. Such lending is sanctioned to promote and develop important sectors like agriculture, industry, import-export, housing and allied activities."

The development banks are quite different from commercial banks in various respects. The development banks do not accept deposits from the general public but the commercial banks accept such deposits. The development banks extend long term credit while the commercial banks extend short term credit. The development banks as compared to the commercial banks perform various promotional activities for industrial development in addition to their supply of fixed …show more content…

A development bank does not accept deposits from the public like commercial banks and other financial institutions who entirely depend upon saving mobilization.
2. It is a specialized financial institution which provides medium term and long-term lending facilities.
3. It provides financial assistance to both private as well as public sector institutions.
4. The role of a development bank is of gap filler. When assistance from other sources is not sufficient then this channel helps. It does not compete with normal channels of finance.
5. It is a multipurpose financial institution. Besides providing financial help it undertakes promotional activities also. It helps enterprises from planning to operational level.
6. Development banks primarily aim to accelerate the rate of growth. It helps industrialization specific and economic development in general
7. The objective of these banks is to serve public interest rather than earning profits.
Functions of Development Banks in India
Development bank is vested with the responsibility of coordinating the working of institutions engaged in financing, promoting and developing industries, agriculture, housing, foreign trade, etc. the main functions of development banks are as

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