ESSAY ON BANKING SYSTEM IN INDIA
A harrowing experience of three quarters of a century has shown that overdosing of nationalization arrests the growth of economy drastically. It gives rise to a monopolistic regime of a few bureaucratic and administrative elites who turn the economic monopoly into political hegemony- all in the name of not merely socialism or communism but in the myth of social welfare. A retrieve becomes difficult. The stunted growth is naturally reflected in the relief of a few at the cost of the rest who are honored with the name of proletariats. That is what the people of East European countries including the State of former USSR realized in early nineties. They did away with the mantle of communism. But to shift from close economy to the free market economy was rather painful. It will take time to adapt to the changing world scenario.
J.V.Shetty, a great protagonist of Bank nationalization has given a fascinating picture of the achievements of banks during their tenure of 25 years. According to him the Gross Domestic Savings as a percentage of GDP jumped from 15% to 24.3 % in the 1969-70 to 1991-92 periods. It shows a growth of 9.7 % in 22 years. Aggregate bank deposits raised from 13 % in the sixties to 20% in the eighties i.e. a growth of 17% in 20 years. The average annual growth rate of bank credit rose by 6% in the eighties. The per capital deposits of course jumped from Rs.96/- in1969 to Rs/-3000 in the 1990s. The figures are realistic of course. But there is a bit of deception. The industrial and agricultural growth in the country during 1990s was enormous looking to the earlier decades in the post-independence era. This was the cause of the growth in the different perimeters of banking activities too. In a progressive economic development it is quite natural. It would rather be delusive to give credit for all this to nationalization. Had the banks been in the private sector the picture might have been brighter still.
Through the nationalization the Government – rather the ruling party increased its potentiality in giving loans to different categories both as a genuine effort to help the poor and as a popularistic design. A large number of people have been helped under IRDP Self Employment Programme. 20 Points Economic Programme resulting in a credit of Rs.11, 358 crores covering 212 lakhs borrowal accounts. The results have been good as well as bad-bad in the sense that a huge amount was never returned affecting the viability of many bank. According to an authentic report only four nationalized banks stood the test of viability in 1994. The banks could not withstand the social responsibilities that were thrust upon them.
The post-liberalization era stood as a challenge to the whole banking system in India as it had in the East European countries and the liberated States of the former USSR and Russia.