GOLDEN JUBILEE YEAR OF BANK NATIONALISATION
2019 GOLDEN JUBILEE YEAR OF BANK NATIONALISATION
- Nationalization refers to the transfer of public sector assets to be operated or owned by the state or central government.
NUMBER OF BANKS IN GLOBAL TOP 100
BANK CREDIT GROWTH
COMPARISON – PSBs & NPBs
- PSBs are inefficient compared to their peer groups on every performance parameter.
- In 2019, investment for every rupee in PSBs, on average, led to the loss of 23 paise, while in NPBs it led to the gain of 9.6 paise.
- Credit growth in PSBs has been much lower than NPBs for the last several years.
- The microfinance sector, especially given its transformation since 2000, provides a good illustration of how social goals can be achieved at scale using business models that are different from that of PSBs.
- Most microfinance institutions (MFIs) started as not-for- profit institutions. Post 2000, while their objective remained poverty alleviation via inclusive growth and financial inclusion, MFIs moved from purely pursuing social goals to the double bottom-line approach of achieving social and financial returns.
- The emphasis on social impact at the “bottom of the pyramid” combined with good financial returns of some of the leading MFIs, brought many mainstream commercial entities into the sector.
- For instance, some banks partnered with MFIs by lending to MFIs for on-lending the money to this segment and thereby fulfil their priority lending obligations.
- The United Nation’s declaration of Microfinance year in 2005 highlighted the role of MFIs in poverty alleviation.
- Some MFIs have transformed themselves into banks as Figure A shows the exponential growth in the impact that MFIs have had since 2000.
- As of 2016, 97 per cent of the borrowers were women with SC/ST and minorities accounting for around 30 per cent and 29 per cent of the borrowers.
- This shows that the loans given by these MFIs primarily cater to the marginal sections of the society.
- India’s largest PSB.
- 55th largest bank globally.
- Founded as bank of Calcutta in 1806.
- Took the name of imperial bank of India in
- Became a state owned bank in 1955.
BENEFITS OF NATIONALISATION
- Allocation of banking resources to rural areas agriculture & priority areas .
- Rural bank branches increased .
- Credit to rural areas increased
ENHANCING EFFICIENCY OF PSB : WAY FORWARD
- Employee Stock Ownership Plan (ESOP) for PSBs’ employees.
- Representation on boards proportionate to the blocks held by employees to incentivize employees and align their interests with that of all shareholders of banks.
- Creation of a GSTN type entity that will aggregate data from all PSBs and use technologies like big data, artificial intelligence and machine learning in credit decisions for ensuring better screening and monitoring of borrowers, especially the large ones.