Objectives and Performance:

Objectives and performance of nationalization of the commercial banks is the major aim of the govt. Before to that we first study the meaning if nationalization. Nationalization means the process by which a government takes control of a private industry or assets and converts them into state ownership. Nationalization is basically done with the intention of ensuring that the industry or assets are managed in the public interest, often in sectors deemed vital to the national economy or security.

Before Nationalization that is before 1949, commercial banks in India were completely owned, controlled and managed by private entrepreneurs and shareholders, the process of Nationalization of banks began when the RBI was nationalized on January 1, 1949 with the passing of RBI act 1948. It was essential to nationalize the RBI as the central banks of India in order to bring greater co-ordination of monitory, economic and fiscal policies in independent India which was a very important step on the path of planned development. The objectives and performance of nationalization of commercial banks are.

Objectives of Nationalization of Commercial Banks:

The objectives of nationalization of commercial banks is typically undertaken with several key objectives in mind, aimed at improving the overall economy and ensuring the financial system serves the public interest. The objectives include:

1. To mobilize the saving of the people to the largest possible extent and utilize them for productive purpose.
2. To ensure the operation of the banking system for a larger special purpose and the subject them to close public regulation.
3. To meet a legitimate credit needs of private sector industry and trade big or small
4. To meet in an increasing manner the needs of productive sectors of the economy and in particular those of formal small industrialist and self employed, professional group.
5. To actively foster the growth of the new and progressive entrepreneur and credit fresh opportunities for neglected and backward areas in different parts of the country.
6. To curb Use of bank credit for speculative and other unproductive purposes
7. To develop Adequate training and reasonable terms of services to bank staffs
8. To provide sufficient professional management and modern management techniques and practices in the field of banking system.
9. To expand the branch network of banks in the different parts of the country.
10. To curb regional and sectoral imbalance in banking system.
11. Expanding banking services to underbanked and unbanked regions, particularly in rural areas, to ensure that all segments of society have access to financial services.
12. Strengthening the stability and flexibility of the banking sector to prevent bank failures and financial crises, and to protect depositors’ interests.
13. Ensuring that credit is available to priority sectors such as agriculture, small and medium enterprises and other industries important for national development.
14. Using the banking system as a tool for achieving social objectives, such as poverty alleviation, employment generation, and balanced regional development.
15. Reducing the concentration of economic power in the hands of a few large private entities and promoting fair competition within the banking sector.
16. Ensuring that resources are allocated efficiently in alignment with national economic priorities and development goals.
17. Enhancing transparency and accountability in the banking sector, and ensuring the national interests and public welfare.

Performance of commercial Banks:

1. Branch expansion: Nationalized banks often expand their branch networks to rural and underserved areas, improving access to banking services for a larger segment of the population. For example, the nationalization of banks in India in 1969 significantly increased the number of rural branches..
2. Growth of Deposits: Besides there has been functional diversification in the form of growth Bank deposits is one of the great achievement of nationalization.
3. Credit expansion: There has been an impressive record of the nationalized banks in the way of credit expansion amount advanced by them increased.
4. Priority sector lending: These banks have undergone a major transformation from wholesale banking to retail banking. In other word there has been greater emphasis on dispersing credit to a priorities sector compromising agriculture, small scale industry, transport operators, retail trade, professional and self employed persons and education.
5. Spread of banking in rural areas: Since nationalization the spread of banking has increased considerably in rural areas as a result of the deliberate policy of opening a large number of branches in rural areas
6. Reduction in regional disparities: Regional imbalance in the availability of banking facility has been considerably reduced the majority of these branches have been opened in unbanked areas. In June 1969 there was 74 Bank branches in Assam, 172 in Haryana, 42 in Himachal Pradesh and only 2 in Nagaland. In June 2003 their number has increased to 1212, 1580 784 and 70 respectively. The average population per bank office declined to 16,000 in June 2003 again 65000 in June 1969.
7. Revenue generation and social objective: Profits from nationalized banks can be a significant source of revenue for the government, which can be used to fund public services and infrastructure projects. Nationalized banks often direct credit to priority sectors like agriculture, small and medium enterprises and infrastructure, fostering economic development and job creation.
8. Economic Stability: Nationalized banks can contribute to economic stability by being more resilient during financial crises, as they may receive government support and be subject to stricter regulations.

also read: explain the credit creation of commercial banks?