Nationalisation of Banks | Social Issue Essay, Article, Paragraph for Class 12, Graduation and Competitive Examination.

Nationalisation of Banks

Scheme of the essay

Exposition: Socialistic pattern of society demands nationalisation.

Rising Action: Banks play an important role in the functioning of the economy.

Climax:

1. Public ownership will eliminate the use of bank credit for unproductive purposes.
2. A welfare State should not ignore public interest.
3. It is wrong to say that people in power will get credit from banks.
4. Nationalisation does not lead to inefficiency.
5. Nationalised banks will provide jobs on the basis of justice.

Ending: Nationalisation of banks was not a hasty step.

India decided to adopt a socialistic pattern of society. This does not imply ownership of production by the state. The pattern does not impose on us the obligation to bring the strategic areas of our economy under state ownership and control. It means that the Government is obliged to take remedial measures to ensure that our political democracy is not eroded by economic distortions. It was with this aim in view that major banks were nationalised.

Banks play an important role in the functioning of economy. For those who have money to spare, banks are the custodians and to the millions of the farmers, artisans and other self-employed persons a bank can be a source of credit. Even established trade and industry, big or small, cannot function or expand without adequate bank credit. So, an institution such as the banking system which touches and should touch the lives of the millions has to be inspired by a larger social purpose. That is why there has been a widespread demand that major banks should be not only socially controlled but publicly owned. It is not an accident that this has been the practice even in some countries which do not adhere to socialism.

Public ownership of the banks will help to eliminate the use of bank credit for speculative and unproductive purposes. In fact social control over the banks was to achieve some objectives and nationalisation of these banks will help us to achieve them earlier. The banks will extend credit to the priority areas like agriculture, small industry, and new entrepreneurs. This will help agriculture and industry to make progress and also to replace imports by domestic production. Nationalisation will help more equitable distribution of credit throughout the country. In this manner special attention will be paid to the states which have been lagging behind.

The banks in the earlier days used to give credit to the speculators or to those industrialists who tried to create monopolistic tendencies at that time. Speculation in essential and other commodities leads to inflation which has become extremely harmful to the soundness of our economy. The directors used to be partners in this type of clandestineness. Similarly, it is very dangerous if any trader or a group of traders has control over some commodities in the country. This gives the traders easy money and so the power to exploit. After the nationalisation of the banks, credit has been channelised according to the priority fixed by the Planning Commission.

A welfare State can never ignore the public interest. Banks before nationalisation were indulging in unhealthy competition among themselves and were also indulging in unhealthy activities.

After nationalisation it is not possible for the banks to have their own way. One of the defects which may result from nationalisation has been pointed out by the criticism of nationalisation. They say the party in power will have an easy access to public money, particularly during elections. This criticism is not so much tenable as it seems to be. It is easier for the political parties to establish their contacts with the privately owned banks. In this manner the political parties can exploit the private banks more easily than the nationalised ones.

Another point of criticism is that nationalisation often leads to inefficiency. Of course, it is correct but if we view the problem in a larger perspective then it is wrong. Efficiency of any institution depends upon administration and not upon private ownership or nationalisation. If the administration is efficient, the working of banks will be smooth as it used to be.

Before the nationalisation, recruitment of staff in a bank totally depended upon the discretion of a few persons. That is why there was favouritism and nepotism. After nationalisation seven regional boards have been constituted and they confine the recruitment to their own region. So, nationalisation of banks helps recruitment process better and healthy.

Nationalisation of the banks was neither a hasty step nor an ill-conceived decision. Rather it is an important step forward in keeping with the promises made to the people. It is just a part of the larger programme of government. There are many items of the programme which are to be studied in depth, in order to utilise the banking system for the social and the national welfare. In fact, it was a significant step towards economic progress.