Banking is a very powerful instrument of social change. Banks are playing a crucial role in bridging the gap between the rich and the poor. In fact, banking is the backbone of the modern economy. It is difficult to visualize how trade, commerce or business can be conducted without an efficient banking system.

Banking had been in existence even in earliest times, though in other forms. In India, as in other countries, there were money-lenders who charged very heavy rates of interest. The money lenders did not have the welfare of the people at heart.

They only wanted to fill their own pockets and never missed an opportunity to exploit the poor and the needy. There was nobody to check these malpractices. People condemned the money lenders, but they could not do much. They felt helpless once they were caught in the vicious net of the money-lender.

The modern banking system has no scope for this kind of exploitation Before nationalisation, banks were catering to the needs of only a small section of people belonging to the upper strata of society. In rural areas, the needy until quite recently had no choice but to go to the money lender and take loans on his terms. So the benefits of modern banking did not reach the poor.

With a view to bringing commercial banks into the mainstream of economic development with definite social obligations and objectives, the Government acquired the control and ownership of 14 major banks in the country in July 1969.

Six more banks were nationalised in April 1980 Some of the objectives of the public sector banks were: (a) to mobilise savings of people to the largest possible extent and utilise these for productive purposes, (b) legitimate credit needs of the private sector, (c) to acutely foster opportunities for helping neglected and backward areas of the country, (d) curb, use of bank credit for speculative and unproductive purposes.

The philosophy behind nationalisation of banks was that they should function as an instrument for promoting economic and social development in more purposive manner. As against 8262 branches at the end of June 1969, the number of branches at the end of 1992 was more than 60,000.

The thrust of expansion policy has improved the availability of banking facilities in rural areas. They have started extending loans at concessional rates of interest to small farmers, entrepreneurs, artisans, labourers and members of ST and SC. Lead Bank scheme was also introduced in 1969.

Unfortunately, the expectations of the policy makers and the people have not been fulfilled. Since the nationalisation of banks, there has been a slow deterioration in their services.

The banking staff has become ineffi cient, callous and indifferent to the public. Political interference has also adversely affected the working of the banks. Writing off of the loans for political gain, has put the banking services off the rails.

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