Banks and other financial institutions have played an important role in strengthening the country’s economy. The Indian economy had been devastated due to prolonged slavery. At the time of independence, the country was dominated by private banks and pawn shops, who worked only for their own benefit. For this reason, the banks were nationalized in 1969 and 1980. The National Bank for Agriculture and Rural Development (NABARD) was established in 1982, the Small Industries Development Bank of India (SIDBI) in 1990 and the Regional Rural Banks in 1975 In this direction, cooperative banks, land development banks, etc. were also formed and the concept of non-bank financial corporation (NBFC) was developed.
Before independence, around 1,100 small and large banks were operating in the country. The largest and oldest bank in India that still exists is the State Bank of India. It was established in 1806 as Bank of Calcutta and in 1809 its name was changed to Bank of Bengal. It was later known as the Bank of the Presidency. On July 1, 1955, the government named it State Bank of India and a bill was passed in this context in Parliament, known as the SBI Act 1955.
The main goal of a private bank is to make profits, while the goal of public sector banks is to make profits while addressing social concerns. For this reason, the concept of inclusive development is being realized in the country. However, over the past 73 years India’s economy has grown tremendously. Even today, there is a need for private banks. Thus, recently, the central government initiated the process of privatization of two public sector banks, namely the Central Bank of India and the Overseas Bank of India. In the modified scenario, consolidation of public sector banks also took place. There were 27 public sector banks in the country in March 2017, the number of which dropped to 12 in April 2020.
The regional rural banks were established on the basis of the recommendation of the “Narasimham Committee” by an ordinance of the year 1975 and received constitutional recognition based on the 1976 Regional Rural Banks Act. Its aim is to accelerate agriculture, commerce, industry and other productive activities. in rural areas and to provide financial support to small and marginal farmers, agricultural workers, small entrepreneurs in rural areas according to their needs. This bank is managed with the assistance of the Indian government, state governments and sponsor banks. The Indian government, the sponsoring banks and the respective states respectively own 50, 35 and 15 percent of the shares of these banks. These banks are regulated by NABARD. To strengthen regional rural banks, the government consolidated these banks in three phases. Today, the number of regional rural banks in the country has fallen to around 45, down from 196 in 2005.
NABARD is the umbrella financial institution that finances agriculture and rural development. In addition to agriculture, it works for the development of small industries, cottage industries and infrastructure projects. It is a statutory body. The goal of NABARD is also to realize the concept of financial inclusion. It prepares district-level loan programs so that financial institutions can meet the financial needs of the villagers.
With the help of cooperative credit societies, cooperative banks do the job of helping farmers, landless farmers, and farm laborers operating middlemen and lenders in rural areas. The cooperative movement in India was started with the aim of helping the overall development of farmers, farm workers, artisans, etc. The history of cooperative banks is very old. It came into being in 1904 after the passage of the Cooperative Societies Act.
The Land Development Bank has played a very important role in strengthening rural India. This bank provides long-term loans to the needy. This capital is provided by the state government, nationalized banks, cooperative banks, etc. The main function of the Land Development Bank is to grant loans by mortgaging the land. Loans can be taken from this bank for agriculture, farm machinery, tractors, land improvement, repayment of old loans, etc.
SIDBI was established on April 2, 1990 under the Small Industries Development Bank of India Act 1989. The function of this bank is to provide financial assistance for the growth of micro and small industries. It also works for the promotion of small industries and the coordination between development work. It has played an important role in strengthening infrastructure in rural areas since its inception.
Financial institutions, which are not banks, but take deposits and offer credit facilities like banks, are called NBFCs. NBFCs don’t just include financial companies. The companies involved in this field do investment and insurance business, chit funds, investment banking, stock exchange, alternative investments, etc. The total number of NBFCs registered with the Reserve Bank of India as of January 31, 2021 was 9,507. At present, the total asset size of the sector accounts for around 14 percent of all listed commercial banks.
Today, NBFCs play an important role in providing deposit and credit facilities to low income families and micro, small and medium enterprises (MSMEs). It also provides credit facilities in areas where banks do not have access. It gives loans on easy terms to people who fail to get loans from banks. The percentage of NPA in the loans granted by it is much lower. Thus, NBFCs have an amazing ability to assess clients’ risk appetites and build relationships with them.
Reserve Bank of India is the central bank of India. It is called the Banque des Banques. It is also the operator of all banks in India. He is still active in keeping the Indian economy healthy. It was created on April 1, 1935 on the basis of the provisions of the Reserve Bank of India Act 1934.
Financial institutions are the backbone of the economy. With the help of these institutions, the dream of inclusive development is coming true in the country. Even during the Corona pandemic, financial institutions play an important role in strengthening the economy and providing relief to the common man. The back-up plan has been announced by the government in several phases since the start of the corona pandemic. Under the aid program, the aid amount was transferred directly to the accounts of the eligible beneficiary, which became possible through the opening of Pradhan Mantri Jan Dhan accounts. Apart from this, arrangements have also been made to make other financial aid granted under the relief plan through the banks. Today, banks also provide life insurance, health insurance, crop insurance, pension, etc. Financial institutions are also working to provide loans to millions of artisans and laborers working in the unorganized sector under the Pradhan Mantri Mudra program. Due to their positive role, Indian economy is improving even during the Corona period.
Opinions expressed are personal
