Fifty-two years of experience of nationalization has not been pleasant for the banking industry

- Government has to spend Rs 2.50 trillion but no improvement is seen

On July 19, late. The government led by Indira Gandhi took a big step in the country's banking sector and that was the nationalization of banks. Fifty-two years after the move, the question of whether the move was right or wrong does not remain unanswered. If the move was correct, it would not be an exaggeration to say that there was no need to privatize the banks in the country at present. However, the purpose behind the nationalization was to provide bank lending to the poor and vulnerable. It can be said that this purpose has been fulfilled to some extent if not completely.

Fifty-two years ago, 12 banks with a deposit of at least Rs 50 crore were nationalized from midnight on July 15. Then 11 years later, in 190, the other six big banks with deposits of over Rs 500 crore were nationalized. After independence, the country's banking system had many problems and the flow of credit to key sectors of the economy and the benefits of the banking system became the main issue.

After nationalization, the number of branches and operations of banks increased significantly and banks started reaching out to remote areas of the country. The nationalization of banks resulted in a sharp increase in bank deposits and savings and the use of banks to meet the country's growing fiscal deficit. However, political interference in the banks also continued to increase which began to affect the profitability of the banks. Political interference almost wiped out the independence of the banks, which led to the banks going bankrupt and eroding their capital, which has led the government to repeatedly pour money into the banks.

The rise of new private banks in the Indian economy began in the 1990s when the rise for public sector banks began. Competition from private banks also forced public sector banks to be generous in providing credit to the lending front, especially to industries, in order to survive in business. It was from here that the collapse of public sector banks began and the seeds of bad assets or NPAs began to be sown.

Our public sector banks are run on tax money collected from the people and it is not that the bank operators themselves are inefficient. India is the only democracy in the world where the government itself used to run the bank on a commercial basis after nationalization. But there is no professional approach in its management. After nationalization, the condition of most of the public sector banks in the country was not commendable. Although the government has spent Rs 2.50 trillion in the last few years to improve the condition of banks, the improvement has not been noticeable. Policymakers are slowly realizing that government policies are responsible for the massive increase in NPAs.

Banks have fallen ill as a result of high NPAs. The causes of this illness are well known to the government and policy makers. A drug called recapitalization is being used to raise sick banks. It is not uncommon for banks to become healthy through this drug but it is also a fact that this health is temporary.

The present government is well aware that government intervention is declining if public sector banks are to become truly functioning banks and that is why they have reduced the number of banks by initiating massive consolidation and privatization of banks and initiating an exercise to privatize some banks. Has come. To reduce government interference in the operations of banks, its shareholding will be systematically reduced. The reduction in government share will not only enable banks to operate independently, but will also make it easier for banks to raise money from the market and relieve the government of the responsibility of depositing money in banks, the government has realized.

But a recent report casts doubt on the privatization process of two public sector banks and a state-owned insurance company in the current financial year. The government is claiming that the privatization process will be prolonged due to the lengthy process of getting a buyer. The process of moving banks towards a brighter future by taking remedial measures rather than raising NPAs by dumping the money of innocent taxpayers in the banks of the country should not be stopped now. Will have to take. Only then can the misuse of innocent people's money be stopped and the country's banking system be seen to be operating on a truly commercial basis.