Essay, Paragraph or Speech on “Banking as An Instrument of Social Change” Complete Essay, Speech for Class 10, Class 12 and Graduation and other classes.

Banking as An Instrument of Social Change

Banking is the backbone of modern economy. No business, trade or commerce can be conducted on large-scale without an efficient banking system. Banking in some form or the other has always been there from the ancient times. When Jesus Christ turned the tables of money-changers outside the temple of Jerusalem, he was only protesting against the malpractices of the then existing banking system. When Prophet Mohammed forbade usury to his followers, he was only condemning the cruelty of bankers of those days, who used to suck the blood of their helpless victims in the form of exorbitant interest.

Before the nationalisation of banks in July 1969, the commercial banks of India had an urban and selective group outlook, responding mostly to the credit requirements of a few big industrialists and affluent businessmen. But the post-nationalisation era witnessed a radical change in banking policy. They have been vested with new social obligations, besides, mobilising savings and credits with a view to gear up for a social and economic change in the country. Instead of becoming the banks of a ‘particular section’, they have become the banks of the ‘general public’.

The new banking policy aims at ruralisation of banks. As a result there has been a phenomenal growth of bank branches. There has also been an astronomical rise in the number of employees. Further an ordinance called the Rural Banks Ordinance promulgated by the President on September 26, 1975, gave a momentum of the task of ruralising banks. As a consequence, the banking services are now available to the masses at their door-step, and the banking industry has entered the hinterlands and economically backward areas.

Fourteen- major commercial banks were nationalised in July 1969. It was a new feather in the cap of the banking industry. The industry got a further impetus with the nationalisation of six more banks in 1980. The public sector banks account for about 90 per cent the total banking system in the country.

Before nationalisation banks were catering to the needs of only a small section of people belonging to the upper strata of society. That elitist approach of banks has since given way to an egalitarian one in the post-nationalisation period. The profit motive has been replaced by welfare motive. Before nationalisation, there was lack of banking facilities in rural areas. But after nationalisation, most of the branch expansion took place in rural areas. The proportion of rural branches has gone up many-fold.

Before nationalisation, banks were financing large and medium scale industries while the priority sector, namely agriculture, small-scale industries and exports was being neglected. After nationalisation this sector received greater attention. By March 1985, about 40 per cent of total credit was provided to priority sector.

The DIR (Different Rate of Interest) scheme was introduced in 1972 by the public sector banks for the upliftment of weaker sections of society. Under this scheme, banks are required to lend up to one per cent of their lending at a rate of 4 per cent interest to specially disadvantaged classes. Landless labourers, small land-owners, rural artisans and members of scheduled castes and scheduled tribes are to benefit under this scheme. With a view to augment banking facility in rural areas, the Regional Rural Banks (RRBs) were established on October 2, 1975 on the recommendations of the working group set up by the Government of India. The Regional Rural Banks have played a vital role in the development of rural economy by financing small farmers and petty entrepreneurs in villages.

The harassment caused to the people by the greedy and cruel money-lenders has now ended. Banks are offering loans to People on easy terms and with a low rate of interest. However, granting of such loans often results in non-repayment by the borrowers. Non repayment adversely affects the profitability and viability of banks. Sometimes, such loans are written off on political considerations. The politics of loan means and writing off of bank-loans have given a set-back to Indian Banking. So has the bank scams.

There is no wonder that there are allegations of misuse of public money for political purposes through loan melas and the like. All the same, the Union Government has initiated SEPUP (Self-Employment Programmes for Urban Poor) to bring down the number of people living below the poverty line in urban areas. This scheme is being implemented by the banks. Of late, banking habit has also taken roots among the lower middle class people and this has resulted in an increase in savings. Increased saving is a positive feature in the economy of a country.

Banking is a major instrument for socio-economic transformation aiming at minimum rich-poor disparity. Our nationalised banks are, no doubt, playing their part effectively and they have helped a lot in the overall development of our country. However, nationalisation by itself cannot be a panacea for all the problems afflicting the banking system in the country. Much depends upon how these institutions are run and managed. If our nationalised banks are able to render more prompt and efficient service to masses, they would be able to make significant contribution to the country’s economic development.