The
Banking system in India was started way back by the Britishers and in 1935 they
formed the Imperial Bank of India with about 93% of the stake of the British
Empire and seven percent of the stake of the Indian Businessman then . The focal point of the system was to
keep a thorough check of the flow of the unaacounted money that the Indians
were and would exchange while engaged in their business
The Britishers by then had brought in a
lot of reforms after Lord Curzon and thereafter Lord Cormwallis ruled Indian.
So many of them like the Land reform, the taxes from it, the agriculture
reforms, the taxes from it, the taxes
implied on the small medium and the big business and the regulation of the flow
of the money from it and there were many other reforms and the system of the
tax implied on the same was introduced
It was agreed on principal that the
Banking system ought to be started in the country where the money could be
pooled in one place and it could be used for the welfare of the people and thus
the moot point of starting the banks at India did take place.
The British India Central Bank was the
first to have been floated which later became the Reserve Bank of India
.Thereafter two more Bank came into prominence.The first ewas the Punjab
National Bank and then the Imperial Bank
of India which was known as the State Bank of India
Once the State bank of India came into
the picture after Independence, the modality was changed. It had the stake value of 93% of the people and
only 7% of the stake of the Union Government then . Slowly the other Banks
started coming into the force.
India
achieves her Independence:: The Princeley State’s Bank takes shapes
On August 14th 1947 at
11.47PM India secured her Independence and it was Pandit Jawaharlal Nehru who
announced that India is an Independent country now. The next day the charge of
this nation was given to Mr Chakravarti Rajgopalachari. It was he who first
floated the take the entire charge of the Banks that were started at the regime
of the Britishers and take the stock of the account. When the charge were taken
he was surprised to know that there were NO and NOTHING in terms of CONCRETE
and TANGIBLE that could be seen at the Bank.
The Britishers before then and that in a
calculated manner had shifted all their
and the assets from there to London to the “
Queen’s Park ” where the Queen of England was breathing with peace and
tranquility.All the asset of Indian by then was transferred to Great Britain
and places where the YOUR HIGHNESS had maintained his personal account . It was
then the idea was mooted for the people to contribute to the banks which
remained at India and it was that moment that the riches at India had pooled
their money and had put into the accounts of the survived banks at India. It
was found out that the people who had pooled their money and had put their
earned liquid cash at the Bank plus the Gold as well contributed to about 93%
of the booty. Hence the Government contributed about 7% to complete the formalities
and thus the Imperial bank of India started functioning and the Imperial Bank
of India later was to become the state Bank of India. Side by side the Punjab
National Bank was also formed and was put into operation under the Infian
Banking regulation act
BANK’s :: HONEY HIVES FOR THE PRIVELEGED
Though the banking system did start the benefeciaries were the
privileged section of the society .It was NOT AT ALL possible for the common man and the very
ordinary man to approach the Bank to get anything out of it .The rates of the
interest too varied. Those who had put their money to start these kind of bank
which the Government then was running they would be paid a high rate of
Interest then by the Bank.However those who did not and had approached the bank
they would have to pay a very high rate of interest to the Bank to repay their
loans etc taken by them from the Bank . This made the operation of the Bank a
bit un - orchestrated and demotivated as a point of functionality to the
suppressed . This was noted in a large manner
It was noticed that the banks even
getting and drawing the best of the business facilities and the oppressive
benefits from the Government were not able to perform the way the Government
wanted .Hence the Government took a decision to completely read the operation
and the functionalities of the Bank .
PRINCELY
STATE OPENS THEIR BANK
In
1956 after the reorganization of the State, somehow the states which enjoyed
the privilege of PRIVY-PURSE till then could visualize that there was a
danger to their amassed assets and that at any point of a time the Government
could sieze their asssets like the manner their states were seized by the Union
Government then
Sensing this danger, the princely states
which were enjoying the privy purse, together came in and formed their Bank. To
cite an example we had the Travancore National Bank, the Hyderabad National
Bank, The Baroda Bank, the Jaipur
National Bank to name a few. These Banks were the one’s who were the Maharaja’s
under the British rule. These Rajas and Maharajas then to keep their money safe
took the permission from the Reserve Bank of India and floated their Banks.
However these Banks were an eye wash.To the people it appeared that these were
for the purpose of regulating the transactions of the bank as accordance to the
need and the policies of the Government but in reality these were the places
where the assets of those Rajas and the Maharajas wer kept safe with the
security provided by the Government of India. These Banks for the sake of the
name were following the rules of the Reserve Bank of India but were running
their business according to the whims of the of Maharajas and the rajas whose
Bank that it belonged.
These Banks had the liquid asset and the
inmovable asset mauch mauch larger and more than the Indfian Government could
hold or have.Mrs Indira Gandhi visualized that and slowly started making a move
to grab the propriety of these Banks slowly but surely.
BANK
NATIONALISATION IN 1969
Studying the structure of these Banks
and internally taking a decision that these banks ought to be nationalized,
Madam Indira Gandhi plotted a long drawn national policy and secretly laid down
a principal of nationalizing these Banks and it was July 19th 1969
that she announced on the All India Raio that all the private banks and the
banks that belonged to the Maharajas and the Rajas of India has been
NATIONALISED and thereafter it would b the Government with the RESERVE BANK OF
INDIA which
would regulate and control these banks
and thus the Banks at India at that point of a time was nationalized
TITANIC APPROACH , TETONIC SHIFT :: BANKING MADE EASY
The Indian financial sector underwent a tectonic shift 50 years ago this
week, when the Indira Gandhi government nationalized the 14 biggest commercial lenders on 20 July 1969 after
announcing about it and declaring the nationalization of these Banks on the All
India Radio on December 19th
1969. The second volume of the official history of the Reserve Bank of India describes bank
nationalization as the single-most important economic policy decision taken by
any government after 1947. Central
bank historians say that in terms of the impact, even the economic reforms of
1991 was pale in comparison.
The landmark decision came at the end of
a troubled decade. India was buffeted
by economic as well as political
shocks.
There were reasons and there were the
plots to take this steps.The REHABILITATION and the CONSTRUCTION of INDIA after
the THREE wars that it fought in 1948 and 1965 against Pakistan and 1962
against China, especially the aggression that India had to face and incur
against the Dragon Red Army—that put immense pressure on public finances. Two successive years in 1968 and in
1969, of drought had not only
led to food shortages, but also compromised national security because of the dependence on American food shipments to
keep hunger at bay. Fiscal retrenchment through a three-year plan
holiday had hurt aggregate demand as public investment was cut.
INDIAN MONEY DEVALUATION :: THE NATION GOES ON THE KNEES
The 1966 devaluation of the rupee was an
economic success, but also a lightning
rod for political anger. The Congress party had already suffered
electoral setbacks in the 1967 elections. It
was headed for a split. The Naxalites were growing in strength.
However, the devaluation had helped improve the balance of payments while the
Green Revolution began to ease the food constraints.
India was at a crossroads. Many other
countries in Asia had switched to more market-oriented policies in the
preceding years, even within the overall industrial policy framework. Their
growth would accelerate over the next two decades. In India, there had been
some tentative moves in that direction during the short tenure of Lal Bahadur
Shastri. However, Indira Gandhi swung the other way with the support of the
Left. Bank nationalization was one of her responses to the economic and
political challenges of the time.
The impact of bank nationalization can
be thought about in terms of three core areas: deposits, lending and interest rates. The one positive
impact of bank nationalization was that financial savings rose as lenders
opened new branches in areas that were unbanked. Gross domestic savings almost
doubled as a percentage of national income in the 1970s. A growing
part of this was sucked up by the
government itself through increases in the statutory liquidity ratio.
P.N. Dhar writes in his memoirs that V.K. Krishna Menon made the startling
claim in a private meeting with top officials before nationalization that the
government would not have to worry about mobilizing funds once banks were
nationalized.
OBLIGATIONS ON THE
BANKS :: REFUSAL SEES THE NATIONALISATION
It was that the Government of the day through
and under Mrs Gandhi then, started directing the Banks to be approaches and
flexile to the call of the Government anytime and everytime about the sectors
where they would ask the bank to divert their fund for using those for the
development of those sectors.The Government then had earmarked the small and the medium scale industries, the
agricultural sector, the husbandaries and the milk sector as well as the
defence sector.
Banks
were asked to push funds towards sectors that the government wanted to target
for growth. Indira Gandhi told the Lok Sabha on 29 July 1969 that the “purpose
of nationalization is to promote rapid growth in agriculture, small industries
and export, to encourage new entrepreneurs and to develop all backward
areas". This was part of the overall political strategy to
squeeze big business houses that backed her opponents, as well as build a new
political base.
Credit planning also meant that the
interest rate structure became incredibly complex. There were different rates
of interest for different types of loans. The
Indian central bank eventually ended up managing hundreds of interest rates.
This mind- boggling structure was brought down only after the 1991 reforms,
with the central bank managing the pivotal repo rate, while commercial lending
rates were to be decided by banks themselves.
The subsequent political economy was
perverse. Indira Gandhi said in a Lok Sabha debate on bank nationalization: “We have no intention to set up a
monolithic agency to run all these banks. While we must strengthen the
machinery at the Centre, there will be autonomy for each bank and the boards
will have well-
Page-8
defined powers. We will give directions but these will be on
policy and general issues, not on specific loans to specific parties. We shall
be vigilant about the dangers of too much interference—whether it is motivated
by political or other considerations."
PROMISE IN FUTILE
There are no prizes for guessing how long that promise held. The legendary R.K. Talwar would resign
as chairman of State Bank of India in 1976 rather than bend under political
pressure. The political control of bank lending continued even after
the 1991 reforms—and the bad loan mess that has weighed down on the Indian economy
since 2012 is at least partly explained by the credit bubble that grew under
political patronage from New Delhi.
The fact that successive governments continue to maintain a
tight grip on the banking sector shows the political importance of having
control over the credit spigots in the economy.
Bank nationalization was the pivot of a broader political
economy strategy followed in the 1970s—a decade when economic growth barely
outpaced population growth. Average
incomes stagnated. It was a lost decade for India. There is no doubt
that exogenous shocks, such as rising energy prices or failed monsoons, played
a part in the stagnation, but economic policy also hurt. Bank nationalization succeeded in specific areas such as financial
deepening because of the rapid spread of branches, but it eventually did more
harm than good.
Let us
come back to the subject and I reproduce my lines-::
The fact that
successive governments continue to maintain a tight grip on the banking sector
shows the political importance of having control over the credit spigots in the
economy
UPA::ONE AND UPA ::2 :
The Banking Sector LOOTED by the interference of the political niggles
The worst in this sector came between the period
between 2006 to 2013 when the severe and continuous interference of
the political whims especially under the Ministry ship of Mr P C Chidambaram saw the sector completely uprooted off
the feet .It is actually from the start of the period that the businessman
started approaching the banks to reapply loans after loans for their self
interest. Mr Pranab Mukherjee was the then Finance Minister. He vehemently
refused to comply to the dictatorial orders of the one’s who would force him to
bow down and budge to the unwarranted whims of the above to sanction loans to
the very high and very renowned businessman
Finding Mr Pranab Mukherjee a very HARD rock to pierce and
break the UPA-II under the Prime
Ministership of Mr Manmohan Singh changed the Ministry and put Mr Chidambaram on
the seat of the Finance Minister of India. It was here that loans, reloads
and successive loans started taking place at the banks and the directions and
the directives of the politicians above became a EVERY-DAY-TOOL for these
Banks to comply with the order to comply with the directions to lend
money in a huge and voluminous way to the so called HYBRID-AND-FLUID-BUSINESSMAN. Thr loan taken from the first
sanction would not be paid but the loans from the second and thereafter successive
loans completely whipped the Banks and it completely emptied the coffers to the
stage where most of the Banks just did not have any money to find itself to
bear the grind.
The prominent of
such banks were the Punjab National Bank, and some bank like the United
Commercial bank, the United Western bank,
the Central Bank of India , the bank that were the Co-operative Banks,
the State Co-operative Banks etc to name a few.
The HARD-BOILED loot were in the
so called the Co-operative bank and the
State Co-operative banks and the Banks which were specially made for helping the
agriculturist and the farmers. Here at this Banks the so called the MLA’s and the MP’s who controlled these MLA’s would apply to these Banks
immediately after the election at the States and the local elections, in the
guise of all fictitious names
that would be farmers and would transfer the loans into their accounts which
were all fugitive and fraud .This went on and on for so many a years and this
even continues now. This money that has gone out of the account of the Bank to
the one’s who had robbed that and the misfortunes that the farmers always
carried for whom the national outcry- WAIVE
THE LOANS OF THE FARMERS took the Bank’s to the bed of the DEATH and it
became the DEATH KNELL of the
same This is how the banks did go off and to the air and from there to the OBLIVION.
The result is- ALL THE CO-OPERATIVE BANKS THAT WERE SPONSORED BY
THE BIG NAMES OF THE NATIONALISED BANKS WERE OFF AND IT HAD A TERRIFIC
REPERCUSSIONS ON THE MAIN NATIONALISED BANK
RESERVE BANK OF INDIA
:: IT’S ROLE, IT’S DIRECTIVE BLOWN OFF
Looking into all these things the MAIN CONTROLLING BANK, ie THE
RESERVE BANK OF INDIA did come up with their rearguard action and had
advised the Government ruling the nation twice, the first in 2005 and the next in 2011 about the loots and the
illegle way the money were siphoned from these so called the FARMER’S HELPING BANK and the
Co-Operative Banks but this was not taken in a serious manner .
Thereafter when the repeated loans were taken by the BIG-CONGLOMERATES successively, it reduced the holding stock of
the money in the bank. Finding no action that were taken by the Union
Government and the Ministry of Finance then, the RESERVE
BANK had to cut off the lending amount to it’s Banks that were under
them .This again had another impact .The CASH-RESERVE
ratio that the Reserve Bank implies on the Banks under it, was altered and the
implication of the Reserves that the Nationalised Bank had to keep under them
put a brake on the loans that were sanctioned and the rates of the interest for
the loans got higher and the lending rates of the interest were reduced. This
affected the entire business. This is how the Banks were given and served a big
blow by the last Government which ran the country .
Modi Government
2.0 a SUCCOUR to the Banking process
It is the Modi Government which in the year 2019 took the
stock of all the bank’s .The first VERY
EXCELLENT STEP that they did was to CUSHION and CONCISE
the Branch that the bank had. In all
they were 27 nationalised
Banks. Thse have been CUSHIONED
to 13 with TWO BANKS
amalgamated with one . For example the Vijaya
Bank is amalgamated with Bank of Baroda which infact is one of the
richest Bank and the process of banking of the bank of Baroda would be implied upon the Vijaya bank for it’s
operation . In this way the Modi
Government 2.0 has given a FIILIP
to ONE LOSS MAKING BANK to
amalgamate with the other huge profit making and to rework for them to stand on
it’s leg.
The Modi
Government then did start taking the stock of those who took oceans of loans
from the bank not to repay that. The offenders were then searched and trapped
to repay the loans back. Some have fled the country and some have changed their
nationality by escaping through their escaping route. The Government have
sealed their assets and properties and
are at the hunt for them who are at large. The Mallaya’s and the Modi’s fall
into this bracket These
are the big fish. There are many hiding under the curtain and the skins of the
big fishes that the Modi Government has trapped and they are all big TWIGGIES in the Ministries that
lost in the race for power in 2014 and are still roaming free with their head
held high. They need to be told- PAY
IT BACK OR FACE THE CONSEQUENCES. No matter who it would be. Those who
have LOOTED the bank with
their associates have to either return the money back or will have to make the
amends. In that case their properties and the assets have to be taken by the
Government, sell those to get the money back and the defaulters will have to
serve the priosn as the prisoner. Nothing less than that awaits it’s fortune
who so ever it may be. That has to be
the finality of anything that relates with the penalty.
The reorganization of the Banks, the business created by it’s
branches, the number of the branches that each Bank holds their business and
it’s PROFIT MARGIN RATIO, the HUMAN RESOURCES & it’s RATIO, the OPERATIONAL
RATIO and parameters as such has to be reworked and the proper marketing palns
for all thse Banks has to be set.That is the order of the day
The MARKETING
ought to be completely TIME-BOUND-OPERATIONAL-PROFIT
PROCESS .New types of long term, medium term and short term deposit
ought to be brought into foreplay and attractive interest has to be fixed so that
more and more people come to the bank. The credit policies, the policies on the
vcarious loans, the inteset that it could pay and ABOVE ALL- THE REPAYMENT WITHIN THE SCHEDULE
that ought to be time bound has to be the order of the day and ORDER FOR ALL THE TRANSACTION THAT
RELATES TO THE BUSINESS.
This is how the Banking system even now can be restricted to
make it a profitable venture for the business. YES THE OFFENDERS AND THE GUILTIES OUGHT TO BE SEND TO THE JAIL FOR
“LOOTING” THE BANKS- WHOSOEVER IT COULD BE
Regards
Shyamal
Bhattacharjee
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