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Development in Banking PDF
Development in Banking PDF
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“The wealth of the land
Comes from the forge and the smithy and mine
From hammer and chisel, and wheel and hand
And the thinking brain and skilled hand”
- Dr. Walter Smith
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TRAINING AND DEVELOPMENT IN THE BANKING SECTOR
The people of India, i.e., Bharat Varsha can proudly boast their heritage, culture, and
tradition that are completely matchless. Its rich culture largely depends on the legends
that have elevated the Indian civilization to great heights. If Aryabhatta gave a new
system of measurement by inventing zero and pioneered lots of mathematical and
astronomical theories, Sushrut was the first surgeon to have invented several new
techniques of treatment and is considered the father of plastic and cosmetic surgeries.
Amongst these bright stars, there was a person in Pataliputra around 300 BCE who
was a constellation himself. He was Chanakya, the famous teacher, philosopher, royal
adviser and most importantly a superb genius in Political Thought and Economics.
Chanakya is the name not only of an individual but name of an Institution. His name
alone is enough to explain 3his contribution in the Bhartiya civilization. Chanakya
was the genius to establish the first Indian Empire, the Mauryan Dynasty which is
archeologically proved to be the first dynasty in the Indian sub-continent. Chanakya
was one shrewd advisor, whose pearls of wisdom are relevant even today.
The Master Economist of Ancient India is well known for his excellent treatise ‘The
Arth Shastra’. It has rightly been claimed to be the Bible of Economics and offers
wealth of information and insights into the money matters and material well being.
Tipu Sultan - the greatest freedom fighter-- was also a very competent and futurist
leader, an entrepreneur, a democrat, a man of letters and a man of science and
industry. He was far ahead of his times and a nationalist par excellence. Nation-
building was in his genes, mind and heart.
1.1.4 Mantras from Ashoka, the Great and Akbar, the Great
These two greats are the brightest Kohinoors of Indian History, Culture, Philosophy,
and Civilization, Modern day Management Gurus can do superbly well by adopting
their principles, techniques, and practices of management and governance. The more
we explore this precious area, the richer and richer we become.
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1.2 Introduction
Ever since Adam and Eve landed on this planet, training, in one form or the other, has
been playing an extremely significant role in man’s growth, development and
advancement. In fact, what the Homo Sapiens today is, it has been solely because of
training in various forms and manifestations, changing their shapes and the formats
according to changing needs of a particular time and period in the history of human
civilization. The great Greek philosopher Plato (427-347 B.C.) once said: “The most
important part of education is right training in nursery.” Mark Twain (1835-1910)
emphatically asserted: “Training is everything. The peach was once a bitter almond.
Cauliflower is nothing but a cabbage with a college education”. John Ruskin (1819-
1900), the renowned English critic, essayist and social reformer, while talking of
education and training, made a very famous observation: “Education is leading human
souls to what is best, and making what is best of them. The training which makes men
happiest in them also makes them most serviceable to others”. Daniel Defoe (1661-
1731), the well-known English author, once made a very meaningful comment: “A
true-bred merchant is the best gentleman in the nation.” He probably would have
meant that the right kind of up-bringing and proper training in life go a long way in
making an individual a true citizen conscious of his duties and obligations towards
country, society and mankind.
The concept of training has undergone a complete transformation, moving from side-
lines of peripheral activity to the centre-stage in all affairs of human activity,
particularly in business and corporate sector. As consequence of total metamorphosis,
it has emerged as most important tool of growth and development and has attracted
and engaged every body’s attention in the organization. Training is being accorded
the top most priority by the strategic managers, almost as a near panacea for all of
their ills and afflictions. The key- triggers that have forced and facilitated this ‘make-
over’ can briefly be summarized as (i) Impact of globalization, liberalization and
privatization, (ii) Increasing global inter-connectivity, (iii) Newer and smarter
machines / systems and work-place automation, (iv) Computational world, (v)
Changing media ecology, (vi) Increasing global life-span affecting nature of careers
and learning, (vii) Stiffest ever cut-throat competition for market dominance, (viii)
New emerging areas of personal learning / learning portals, (ix) Cross-cultural
compulsions, assimilation and adjustments, (x) Consolidation becoming a key
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strategy amongst buyers and suppliers, particularly in a fragmented and diversified
market of mergers and acquisitions, (xi) Continuing erosion of moral, ethical and
social values / obligations, (xii) Changing face of job market nationally and
internationally, (xiii) Assessment of the training needs of both present future work
force. The collective and cumulative impact of these powerful catalysts on
transformation of training has led to the realization of the need for refinement /
improvement in its definition, format, modules and methods, contents, impact / effect,
reaction of the employees, evaluation of return on training investments and over-all
outcome in terms of productivity, profitability and competitive sustainability.
Formalizing informal learning, evolution and development of new job-skills, growing
focus on knowledge retention and up-gradation are some of the key targets of trainers
/ experts. The only stable thing in the vibrant earth is change and banking cannot be
excluded. Today, the basic approach of banking is going all the way through brisk
revolution in the world. Amend, acclimatize and change should be the key mantra.
Banking sector in India plays an extremely key role in nation’s economy. The State
Bank of India, being the principal Public Sector Bank, has been burdened with the
extra responsibility of discharging its obligation of Social Banking. However, with
the nationalization of major Indian banks in the mid 1960’s, followed by liberalization
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policy in 1991, a lot has changed with the opening of other sectors including banking
and enormously greater than before competition from newer banks in the system.
Banks are beginning to make out Human Resources as the most powerful area of
nucleus competence and do their best to recruit, train and keep the finest of talents in
the industry. There is growing awareness that continuous skill-upgradation and
development is enormously vital not only for staff retention, quality of manpower and
both quantity and quality of output, but is also important for accelerated growth and
development of the entire organization. Banks are eager to attach with exterior
training group for in-house training by having tie-up with top universities and
business schools to help them in their scheme, while others have their own staff
colleges for training them. Inclusion of non-traditional activities like merchant
banking, mutual funds, new financial services and products, individual investment
counseling, etc have been included which has transformed the very business shape of
banks radically.
In nut shell, in the entire gamut of their diverse activities in the global challenging
scenario, banks have to bank on (i) acquiring of new and enhanced skills and their
regular periodical up-gradation, (ii) developing of new competencies and promptly
replacing old ones, (iii) adopting imaginative, innovative and creative techniques of
doing a job differently and (iv) recognizing and treating training function as the most
effectual organizational involvement by formulating a apparent strategy of training
and development within the frame-work of entire HR development.
Going by the dictionary meaning given above, training means an activity, exercise,
effort or endeavor like the one that the gardener does to a tender plant, a mother to a
toddler, a father to a teenager, a mentor to a pupil, teacher to a taught, trainer to a colt,
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‘guru’ to a ‘shisya’, and Dronacharya to Arjun. Training appears to be Nature’s
universal prescription for proper growth and development of all living beings,
including human, on earth.
Lynton and Pareek in their book ‘Training for Development’ defined “training as
one that consists largely of well organized opportunities for participants to acquire
necessary understanding and skills. He identified three distinct phases in the training
process namely: pre-training, training and post-training.”
In a developing country like ours, there is a huge demand for adequately trained
personnel at all levels and all positions in all organizations. Since banks are the
effective partners in the process of economic growth and development, they in no way
can be exception in this regard. It is fundamental to their very survival in the system.
Training, therefore, has to be a continuously on-going process.
R. K. Sahu (2007) has successfully attempted to identify and bring out the key
essentials that comprise training, in real sense term. According to him, the following
are the salient points of the concept of training:
i) The entire process of training consists of clearly defined parameters which has a
beginning and a specific end, with a perceptible forward movement. A properly
designed series of events, cautiously coordinated and merged into a pleasant,
incorporated and result-oriented package constitutes the whole gamut of training
activities.
ii) Training can be seen as a way of empowerment of the participants, engaging them
to make best possible use of opportunities made accessible to them for learning in
training programmes. Training induces behavioral changes in the area of knowledge
and competencies and emphasizes the relevance of their learning on the job front.
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iii) Training helps in acquiring of such competencies to cope with a diversity of
compound and tricky situation and in carrying out assigned task in an efficient and
effective manner.
v) A participant can realize the full range of his potentials and capabilities by means
of training which also assists in removing mental blocks, dispelling those doubts or
misconceptions that may be preventing from attending training sessions.
vi) Training also teaches the participants to appreciate others’ points of views and
develop greater tolerance of disagreements and dissent, thus enhancing their skills and
level of self confidence.
vii) Training helps in establishing a working relationship between theory and practice
by translating acquired concepts, principles, knowledge and skills into perceptible and
functional behavior or actions and vice-versa.
viii) The ultimate purpose of training in most of the cases is to increase organizational
effectiveness through growth of participants’ competencies.
ix) Training being a part and parcel of Personal Development Programmes has
powerful impact on the personality of an individual.
Right from its inception, the idea and concept of training has been on a long
unstoppable journey from antiquity to modern times, continuously evolving,
developing, expanding in tune with the changing needs of the time. Over the
centuries, the societies too have changed and have become more and more complex.
Training also kept often evolving so as to cope with extraordinary changes in the
amount, contents and difficulty of work.
As man invented tools, weapons, clothing, shelter, and language, the need for training
"
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were developed that served the needs of the times, evolving into accepted
instructional paradigms . These diverse forms of training practices were developed at
"
different times, and some of them kept changing through the years, but most of them
are used even today, depending on the training needs and work- situations.
1.4 Need for Training and Development in Organizations – Factors and Forces
Behind
The need for employee training and development may arise because of the following
issues and changes in an organization:
iv) Largely theoretical and non-practical college education affecting levels of gainful
employability..
xv) Keeping pace with the changing times and business scenario
xvi) Bridging the gap between skills requirements and skills availability
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xviii) Nation’s overall growth and progress
Right from the dawn of the 20th century and particularly after the World War II,
training programmes became universal amongst the organizations in United States,
involving not only largest possible number of employees but also expanding the
contents of these programmes. In the 1910s, only a small number of big companies
such as Westinghouse, General Electric, and International Harvester had their own
factory schools which imparted practical skills to their entry-level workers. By the
1990s, nearly forty percent of the Fortune 500 companies had set up either a
commercial institution of higher education or a education hub. In the last few decades,
the companies being confronted with fast technical changes, continuously
multiplying home societal troubles, political upheavals and enormity of global
challenges which include hegemonic globalization, demographic shifts,
poverty/famine/draughts, conflicts/wars, and environmental disasters/catastrophes,
fierce economic competition , had no option but to go in for both extensive and
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intensive training programmes in their organizations, treating them as nearly a
solution for organizational ills. The massive extension in the contents of training
programmes over time has now largely been accepted as a firm ground reality. The
people seldom query the requirement of training in communication skills, behavioral
skills, creativity, time management, leadership and team building, which are in
today’s common parlance are known as ‘soft skill’. Monahan, Meyer and Scott
(1994), based on their study and interviews with more than 100 organizations in
Northern California, describe the spread of personal development training
programmes as under:
training for workers and human relations training for supervisors and managers, a
widening array of developmental, personal growth, and self-management courses.
Courses of this nature include office professionalism, time management, individual
contributor programs, entrepreneur, transacting with people, and applying intelligence
in the workplace, career management, and structured problem solving. Courses are
also offered on health and personal well-being, including safe diets, exercise, mental
health, injury prevention, holiday health, stress and nutrition. The contents of the
"
modern training programmes world wide cover a vey huge canvas, quite
unprecedented in the history of their growth and development.
Any training and development programme ought to have inputs which facilitate the
participants to increase skills, information, learn intellectual concepts and help attain a
idea to glance into the future. The inputs should be as mentioned below:
5) Attitudinal adaptableness
8) Environmental concerns
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1.7 Benefits of Training and Development for the Banking Sector
The benefits of Training and Development are not only for the organizations but also
for their employees. These can be categorized as under:
g) Improves the magnitude of association among the superior and the subordinates
i) Prompts superiors/trainers to learn from the trainees. This is called Peer Level
Learning
m) Helps the group to enhance their effective managerial and analytical skills
n) Facilitates augmentation and development for promotion from within the system
q) Helps cost fall in various areas like manufacture, people, management, marketing
and sales, etc
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s) Develops a logic of commitment and accountability to the organization for
becoming more and more competent, educated and efficient
d) Enables employees cope up with stress, strain, worry, annoyance and disagreement
confidently and successfully.
i) Shows and provides an employee the opportunity for own development in future.
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k) Helps get rid of panic in attempting a novel task.
1.7.3 Benefits for Personnel and Human Relations, Intra-group and Inter-group
Relations and Policy Implementation
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of India,” which speaks of volumes of the importance and value of reading and
learning.
Addressing the company’s current and future leadership needs is a critical component
of every successful training and development programme. The companies must
constantly keep the three basic components i.e. needs analysis, learning and
leadership, in their mind. Rich dividends will be paid off now and for years to come
by investing strategically in the training programme since employees are the principal
business asset. According to Horace Mann (1796-1859), the great American
educationist, even the most competent teaching “has not a tithe of the efficacy of
training.” So powerful is this tool of transformation: - Never under-assess under-
estimate and under-value such a precious and effective tool and change-catalyst.
The training procedure consists of three phases: First stage is Pre-training. This is also
known as preparatory phase. The second phase is that of Training in all its
components and combinations. The third phase is Post-training, which is also known
as “Follow-up” phase.
An advice that was heard recently, “You train until you don’t need to train anymore”
is an undeniable fact for a living organization.
For undertaking a training programme for its employees, the organization should
invariably provide itself to execute the training responsibility effectively. Briefly put,
this includes the followings:
i) Proper needs assessment and correct identification of the areas of training will help
in analyzing the strengths and weaknesses of the organization
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ii) Imparting training to employees in all kinds of job skills required in the
organization.
vi) Wherever absolutely essential, entering into planning with external expert persons,
agencies or institutions to devise and carry out training programmes.
vii) Acquisition of all kinds of essential training equipments needed for a particular
training programme.
i) Corporate ethics: This covers the worth of whole range of good behavior,
etiquette, politeness, respect, deliberation, individual decor and good bond etc. This
also includes discouraging gossips, controversies, personal work during office hours
and rush jobs etc.
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5) Customer service and clientele retention: These two components always go
hand in hand in any organization.
7) Staff management and team building: Each and everyone in the organization
can achieve more and more through superior teamwork and ideal administrative
practices.
8) Time management: There is an old saying: ‘Time is money’. In fact, time is much
more than money in the present age. Training in time-management-skills not only
shows the importance of being specific but also underlines the importance of
delegation and prioritization in day-to-day functioning. Such trainings also teach how
to set quantifiable, realistic, pertinent and time-bound goals.
11) Safety and security: security training is significant not only when functioning
with weighty equipments/machines, risky chemicals, recurring activities, etc., but is
also helpful in avoiding assaults, etc.
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13) Memory skills: The objective of this training highlights the procedure for better
response, preservation and remembers through audio and illustration learning modes
which helps to get better skills by employing all sanity, associating and subsequent
systematic review plans.
14) Unique skills: the organizations also teach extraordinary job-related skills, which
comprise of technology training, report writing, practical training, and excellence
assessments etc. At this point, it is important for an organization to choose a trainer
who is capable and efficient enough to make a affirmative distinction with his or her
teaching methodologies. The mission and the vision statements of the organization
should always be kept in view. This is a must in every case.
Training does have a distinct and quantifiable impact on performance of its staff
irrespective of the volume or kind of an organization, business or industry, Research
has shown that productivity increases while training takes place. One should be
competitive which the key to achievement and sustainability. To face the cut-throat
competition we must train the workforce, keep them motivated and state-of-the-art
with industry trends and new technologies. the staffs can become valued assets of the
organization when they are equipped with new skills and knowledge.
The business objectives of any successful training programme always focus on the
following issues and aspects:
ii) Enhanced output and excellence: Training can augment the excellence and
flexibility of a business’s services that meets both workers and employer wants by
nurturing (a) precision and effectiveness, (b) good quality work safety practices, (c)
enhanced customer satisfaction and (d) clientele retention. Most organizations provide
on-the-job training during induction itself.
iii) The flow-on effect: The benefits of training can pour through to all levels of an
organization and reduce costs by (a) eliminating expenditure of time and resources,
(b) dropping safeguarding expenses of machines and equipments, (c) preventing
workplace hazards, (d) minimizing recruitment expenses by promoting of skilled
employees internally and (e) getting rid of the menace of absenteeism.
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iv) Staying highly spirited in the market: to stay competitive in a global market
organizations must often alter their work practices and infrastructure. Training
programmes can further improve (a) employees confidence and job- satisfaction, (b)
interpersonal relationship and headship, (c) time-management, (d) motivation and
commitment,(e) risk management, (f) company’s goodwill, image and reputation and
(g) innovations in strategies/practices and products
According to Mark Lamendola, “You need to train your people, but your budget is
virtually non-existent. So how do you satisfy your employees' thirst for knowledge
without drowning them?”
1.11.1 Levels of a Training Needs Assessment: There are three levels of a training
needs assessment:
Occupational assessment examines the skills, knowledge, and abilities required for
affected/concerned occupational groups. It identifies occupational discrepancies or
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gaps required to be taken care of and how. It also examines new ways to do the work
that can eliminate the existing discrepancies or gaps from performance process.
Individual assessment analyzes how well an employee does a job and determines the
competence to perform novel or diverse jobs. It provides information on the areas and
types of training needed by individual employees. Appraisal and performance review,
Peer appraisal, Competency assessments, Subordinate appraisal, Client feedback,
Customer feedback, Self-assessment or self-appraisal are the methods used to
examine the individual need.
The various techniques used in the need assessment are Observation, Interviews, Self
– Assessment, Extensive consultations Questionnaires, Group discussions, Tests
Hamblin (1970) defines ‘evaluation of training’ as, “an attempt to obtain information
(feedback) on the effects of training programme and to assess the value of training in
the light of that information.” This means investigations before, during and also after
training. The whole purpose of evaluation is to create a feedback loop or a self-
correcting training system, forming an integral feature of the same. Evaluation is
meant for improving the quality of training. Essentially, it is an aid to training.
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1.12.1 Need for Evaluation-Rationale Behind
Anderson and Ball (1978) listed the following major needs for evaluation:
iv) To decide about the level of participants for the future programmes
v) To find out the efficacy of various methodologies, cases and exercises used in the
training programme
vi) Besides yielding information on the training programme it may also yield
information on the trainees, their propensity to learn and readiness to apply what is
learnt on the job conditions.
viii) To determine whether the programme was the appropriate solution for the
problems identified.
ix) To create data base that can assist management in taking decisions
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Training Evaluation Model can assist in independently analyzing the effectiveness
and impact of training enabling us to improve for the future.
The model was first published in 1959, was then updated in 1975, and again in 1994,
when Donald Kirkpatrick published his best-known work, "Evaluating Training
Programs."
1. Reaction.
2. Learning.
3. Behaviour.
4. Results.
Level 1: Reaction: This level deals with the response of the trainees towards the
training programme and measures about the contents, venue, duration, trainers, way
of delivering the sessions, etc. which helps in improving the training for future and
important areas or topics that are missing from the training.
Level 2: Learning: This level measures the extent of learning and increase in the
knowledge by the trainees as a result of the training.
Level 3: Behaviour: Change in the behavior of the trainees and application of the
knowledge gained through training is evaluated at this level.
Level 4: Results: At this level, the final results and outcome of the training are
analyzed like increased production and profitability, higher morale, reduced waste,
increased sales, etc.
“ The entire history of banking has been dependent upon the history of journey of
money—and on grain-money and food cattle-money used since at least 9000 BC, two
of the earliest things understood as available to barter. Anatolian obsidian as a raw
material for stone-age tools being distributed as early as 12,500 B.C., with organized
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trade occurring in the 9th millennia. In Sardinia one of the four main sites for sourcing
the material deposits of obsidian within the Mediterranean, trade of this were replaced
in the 3rd millennia by trade in copper and silver. The society adapted from relating
from one fixed material as valued deposits available for trade to another. The scope
for stable economic relations improved a lot with the shift from reliance on hunting
and gathering of foods to agricultural practices, during periods dated as beginning
sometime after 12,000 BC, at approximately 10,000 years ago in the Fertile Crescent,
in northern China about 9,500 years ago, about 5,500 years ago in Mexico and
approximately 4,500 in the eastern parts of the contemporary United States. ”
“ Without a sound, stable and effective banking system in place, no country in the
world, much less India can have a healthy economy. The banking system of India
should not only be completely hassle-free but also be able to meet new challenges
posed by the fast developing technology and other external and internal factors. For
the past three decades, India’s banking system has several outstanding achievements
to its credit. The most striking is its extensive reach. It is no longer confined to
metropolitans or cosmopolitans only. In fact, Indian banking system has tried to reach
even to the remote corners of the country. This is one of the main reasons for India’s
present growth process. The government’s regulatory policy for Indian bank since
1969 has paid rich dividends with the nationalization of 14 major private banks of
India. Not long ago, an account-holder had to wait for hours at the bank counters for
getting a draft or withdrawing his own money. Today, he has a choice. Gone are days
when the most efficient bank transferred money from one branch to another in two
days. Now, it is simple as instant messaging or dial a pizza instant money transfer has
become the order of the day. ”
The first bank in India, though conservative, was established in 1786. From 1786 till
“
today, the journey of Indian Banking System can be segregated into three distinct
phases:
ii) Nationalization of Indian Banks and up to 1991 prior to Indian Banking Sector
Reforms.
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iii) New phase of Indian Banking System with the advent of Indian Financial &
Banking Sector Reforms after 1991.
To make the write-up more explanatory, it would be in order to prefix the scenario as
Phase I, Phase II and Phase III.
”
1.15.1 Phase I
The General Bank of India was set up in the year 1786. Next came Bank of Hindustan
“
and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank
of Bombay (1840) and Bank of Madras (1843), as independent units and called them
Presidency Banks. These three banks were amalgamated in 1920 and the Imperial
Bank of India was established which started as private shareholders’ banks, mostly
Europeans.
In 1865 Allahabad Bank was established and for the first time exclusively by Indians,
Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between
1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank,
Indian Bank, and Bank of Mysore were set up. Reserve Bank of India came in
existence in1935.
During the first phase the growth was very slow and banks also experienced periodic
failures between 1913 and 1948. There were approximately 1100 banks, mostly small.
To streamline the functioning and activities of commercial banks, the Government of
India came up with The Banking Companies Act, 1949 which was later rechristened
as Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965).
Reserve Bank of India was vested with extensive powers for supervision over banking
in India as the Central Banking Authority.”
1.15.2 Phase II
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ii) 1955: Nationalization of State Bank of India.
viii) 1980: Nationalization of seven banks with deposits over 200 core.
After nationalization of banks, the branches of the public sector banks in India rose to
approximately 800%. The deposits and advances took a huge jump by 11,000%.
Banking in the sunshine of Government ownership gave the public enormous faith
and immense confidence about the sustainability of these institutions. ”
This phase introduced many more products and facilities in the banking sector in its
“
The financial system of India has shown a great deal of resilience. It is sheltered from
any crisis triggered by any external macroeconomics shock as other East Asian
Countries suffered. This is all due to a flexible exchange rate regime, high foreign
reserves.”
The nationalization of banks in India took place in 1969 during the Prime Minister
“
ship of Mrs. Indira Gandhi. It nationalized 14 banks then. These banks were mostly
owned by businessmen and even managed by them.
State Bank of India (SBI) was nationalized in July 1955 under the SBI Act of 1955.
Nationalization of Seven State Banks of India (formed subsidiary) took place on 19th
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July, 1960. The State Bank of India is India’s largest commercial bank and is ranked
one of the top five banks worldwide. ”
1.17 Modern Banking System under Fire --- Blots and Blemishes
Right from the very inception of banking sector, besides doing a lot of good to the
economies of the countries all over the globe, the banking system has also been at the
receiving end of the fiercest criticism by the eminent history-making public figures.
Thomas Carlyle (1795-1881), the great English essayist, historian, biographer and
philosopher, wrote in The French Revolution, Vol.1, chapter 1, in an indirect
reference to the failures of financial structures/systems:
“I sincerely believe that banking establishments are more dangerous than standing
Armies, and that the principle of spending money to be paid by posterity, under the
name of funding, is but swindling futurity on a large scale.”
“The bank-- the monster – has to have profits all the time. It can’t wait……
It will die when the monster stops growing. It can’t stay in one place.”
Bartolt Brecht in ‘The Three Penny Opera’ wrote: “What is robbing a bank compared
with founding a bank.” W.H. Vanderbilt, according to news reports dated 2nd
Oct.1882, made a shameful remark: “The public be damned! I am working for my
shareholders.”
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you don’t need it.” Robert Frost, the well-known American poet ridiculed in a similar
vein, “A bank is a place where they lend you an umbrella in fair weather and ask for it
back again when it begins to rain.”
Woodrow Wilson (1856-1924), the 28th American President in ‘The New freedom’
wrote: “There was a time when corporations played a minor part in our business
affairs, but now they play the chief part, and most man are the servants of
corporations.” Therodore Roosevelt (1858-1909), the great American President, in a
speech in Cincinnati in 1902, made a historic remark: “The biggest corporations, like
the humblest private citizen, must be held to strict compliance with the will of the
people.”
Indian experience with the existing banking system in the country has not been quite
different from those of foreign countries. Bihar Chief Minister Nitish Kumar while
addressing a conference at Patna, had publicly expressed his anger and frustration
over unsatisfactory working of banks with regard to non-implementation of many pro-
poor State and Central Government schemes and called for the inclusion of banking
services in the Citizen’s Charter of the proposed Lokpal law to improve the
functioning of banks at the micro level, as the prevalent corruption at that level has to
be eliminated and complete transparency brought about to cater to the banking needs
of the rural people. The Chief Minister further added that the several schemes
launched by the state government could not be implemented properly in absence of
‘no frill’ accounts in the names of beneficiaries and the government had to finally
withdraw its move to disburse funds for cycle and school uniform schemes through
banks and distribute the money by holding camps in the districts. He also made quite
a shocking revelation that the intermediaries asked for commission in schemes like
Indra Awas Yojana, Kisan Credit Cards and others. The government functionaries
have come across several instances where passbooks were found in the possession of
intermediaries instead of the actual beneficiaries. The State governments in the rest of
the county also have to face similar problems because of either non-functioning or
mal-functioning of the banking establishments.
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lokpals (ombudsmen) more visible as well as accessible. The apex bank is now
reaching out to the villages with information like contact numbers and mail ids of
ombudsmen and making public display mandatory for banks. This statement was
made by V.S. Damodar, the RBI General Manager for Bihar-Jharkhand. The objective
was to prevent banking frauds and settle customers grievances quickly. Damodar was
at Jamshedpur to launch a financial inclusion scheme for the unorganized sector---
migrant labourers, slum dwellers and so on --- under which zero balance savings
accounts of such people were opened at the Jamshedpur Urban Cooperative Bank Ltd.
They would be given loans at low interest rates, cheap money transfer and other
facilities.
The Govt. of India is determined to make India more and more bankable. The
Banking Regulation (Amendment) Bill, which was passed by the Lok Sabha in
December 2012, was a necessary first step to put the industry on a higher growth path.
It empowered the banking regulator, the RBI, to look deeper into applications for new
banks, intervene in the management of badly run ones and keep tabs on significant
stake sales. The RBI had made new bank licenses on being given conditional on being
given a bigger regulatory stick. The Central Govt. has been seeding much of the
banking sector’s growth through tax payers’ money, while a generation of private
banks has established deep roots in the system through technological advances,
modern management and a vastly improved customer experience. With an oversight
mechanism in place, banking can now draw in fresh capital.
The Reserve Bank of India in the third week of February 2013 defined new private
bank license norms and allowed any company to open a bank. But the list of
conditions that come with this radical departure from established policy is long. The
promoters’ business should not be misaligned with banking and it should not put the
banking system at risk. The minimum equity for a bank is Rs.500 crore and
companies intending to put up a part of this amount must have been financially sound
for 10 years. The foreign shareholding should not exceed 49% in the first five years
and new banks must list on the bourses within three years. The holding company
should own at least 40% of the bank’s equity, which must be halved in 10 years.
Holding firms will be governed by the RBI as credit companies. At least half the
directors of the holding companies should be independent of the founder groups and a
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fourth of all branches of the new banks must be in rural areas. Obviously, the Central
bank is seeking to cherry pick from among business houses and government-owned
organizations. In the event, the Tatas, Birlas, Ambanis and Mahindras are understood
to have shown interest.
As stated earlier, the Government of India is in the process of affecting major reforms
in the banking sector which are bound to entirely change the complexion of banking
industry in the country. Some of the key areas of contemplated proposed and ongoing
reforms can be put under following categories:
i) Unification and Merger of Public Sector Banks, reducing their number to almost
half of the present figure.
ii) Even Privatization of Public Sector Banks is being considered as an option. There
is raging debate on this issue both in the public domain and the unions/associations of
banking employees and officers.
iii) Issuing licenses for opening more and more private banks. The RBI has already
issued detailed guidelines.
v) Enlarging areas of Social Banking, going beyond agriculture, SMEs and small
export units.
vi) Industry-wise Sectoral banking – feasibility and practability thereof are still a
matter of debate.
viii) Opening of Kisan Banks, particularly in the rural areas, can be rewarding
experience
ix) Enlarging the role of Banking Ombudsman, with view to completely stopping the
malpractices and frauds in the banking sector
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