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Essay on “Role of Banks in Solving Unemployment” Complete Essay for Class 10, Class 12 and Graduation and other classes.

 

Role of Banks in Solving Unemployment

With manpower planning still in its infancy, emphasis has all along been laid on financial and physical targets in Indian Planning. The result has been that optimal deployment of human resources has not received due attention in our Five Year Plans. The Sector targets of the plans have somhow underplayed the need for linking them with their employment potential and therefore, notwithstanding the growth going up, the problem of unemployment has been assuming gigantic proportions from one plan to another plan period. Even major investment in some sectors have received little consideration in so far as the potential they have in creating employment opportunities is concerned. In effect, Indian planning has thus far considered the factor of employment as incidental to economic development and not as a necessary accompaniment.

In a situation where only 45 percent of the total population constituted the total work force, obtaining as it is in India, unemployment certainly affect every section of the community. It poses a very serious threat to the very process of development as also to political stability in the country. We are now having nearly 4.5 million workers (net) added to the labour force every year and this figure is likely to double over the next 15 years. At this rate, about 125 million people would be added to the labour force by 2000 A.D. Of this, agriculture would be able to absorb only 75 million people and 50 million people will require to be given gainful employment and a larger part of it will have to be found in the Employment Schemes of the Government. It is here that the commercial banks of the country have a crucial role to play for mitigating the intensity of unemployment particularly among the educated people of the country.

As purveyors of credit, banks can help achieve the objective of encouraging self-employment in the economy through more dynamic and purposeful plans. However, credit alone cannot achieve economic development or ensure success of all self-employment ventures or even sustain employment promotion. Nevertheless, the public sector banks have to play a much bigger role in financing schemes aimed at generating additional employment in the rural as well as in urban areas, especially for the self-employed persons and small entrepreneurs and farmers.

After nationalistation of the major banks, the banking industry has become an important sector for generation of employment opportunities. The instrument of the credit policy in its armoury needs to be fully geared to mitigate the impact and ultimately remove the scourge of unemployment through a netword of branch expansion. Given imagination, dash and enterprise, the nationalized banks can play a crucial role in creating employment, directly and indirectly, through branches by launching special credit schemes for the benefit of unemployed persons as also for employment generation projects.

It would be useful to know that since the nationalization in July 1969, the number of offices of all commercial banks in the country rose appreciably. Significant improvements have taken place over the years in the provision of banking facilities in unbanked and underbanked areas. To some extent, it has resulted in a progressive reduction in regional disparities in the provision of banking facilities. Despite, however, this rapid expansion in banking facilities, much still remains to be done for the coverage of unbanked rural and semiurban centres.

Taking into account the overall objective of providing banking facilities in the unbanked centres, it was decided that each unbanked community development block should be provided with branches. Branch expansion thus provides commercial banks the much needed opportunity to tone up the efficiency and strive for the optimum utilization of their manpower, especially in rural and semiurban areas.

As supplemental to expansion in the branches, the credit schemes of banks can also help in augmenting employment opportunities. For example, liberal loans to the unemployed will make them self-employed. In fact, self-employment is something that can be given real boost by banks on a mass scale. Although the impact of credit granted by public sector banks to the different categories of borrowers has yet to be assessed in terms of the actual absorption of unemployed people through credit, experience convinces us that both branch expansion and liberal credit policy of banks do help in rehabilitating unemployed people. It is estimated that if each branch entertains 50 proposals for assistance to the unemployed then a total of nearly three million jobs can be created over the next five years.

In sum, any schemed for making the banking sector contribute to the solution of one of the gravest problems of the Indian economy must require foresight, courage and conviction on the part of bank executives. They have therefore to give up their conservative approach to traditional banking and adjust themselves to the changed circumstances with the dynamism that is required of them. Flexibility and liberal attitude towards terms of repayment and rate of interest should be their forte. The top management must delegate some powers to the branch agents for using their discretion in the employment-oriented credit policy for the purpose of granting loans. So far, bank credit has not been granted from the angle of creating self-employment opportunities even as we adopted the policy of more lending to priority sectors and to weaker sections.

For eradicating unemployment from the country, the economic policy of the Government should lay stress on labour-intensive agriculture small scale and rural and cottage industries. Apart from this, the government needs to utilize the self-employment potential through bankers. Banks have been assigned an important role for providing credit to bankable schemes. Targets have also been fixed by the Government for providing assistance to self-employment venture by each bank office. It may be noted that the extent of overall employment created would be of a greater magnitude than the actual number of persons employed in schemes financed by banks as there would be the multiplier effect of the activities generated through the working of the assisted units.

Commercial banks should now direct their operations to become leaders in development rather than merely following the developed areas to maximize private profitability. Every branch of banks should aim at having a certain number of proposals to be considered for self-employment schemes. Such efforts would have to be supported by other agencies; specific areas may be identified for the purpose. Such supportive action calls for a concerned approach on the part of all concerned agencies, viz., Central and State Government, various corporations engaged in development work and the financial institutions. Banks should have talented staff for rendering efficient service in developing their own manpower as also in helping the economy through improving opportunities for self-employment. One important point for consideration is that in the industrial units set up with credit support of banks the quantum of employment generated is generally assessed on the basis of a number of such units without any regard to their mortality rate. It is not fully appreciated that when a self-employment project fails, it creates a demoralizing influence on other potential entrepreneurs as also on the banks. Hence presence of managerial talent in industrial units is crucial. In the rural sector, adequate emphasis must be given to the backward and forward linkages in order that there is the desired impact on employment generation.

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