Finance Ministry – Economy – Banking – Narrative .


The Banking system in India evolved into, and currently is, a mix of nationalized banks, co-operative banks and private banks, including some foreign banks who have been permitted to operate in India. By far the largest segment comprises the Public-Sector Banks and Co Operative Banks. The sector may be described thus:

  1. The nationalized or Public-Sector Banking system has been the subject of many scandals, almost since inception in the 1960’s growing through the 70’s, 80’s, 90’s ’00 to now as widely reported in the media for fake or cooked loans with the connivance of Bank managers and staff, and often, politicians and bureaucrats in the large-very large loans.
  2. This has been a consistent pattern, growing since the 60’s. The implications are immense and self-evident.
  3. This sector has grown to become an additional impediment and drain on the national exchequer and a blockage in the overall growth of the economy as a result of inefficiencies resulting from the lack of accountability of the workforce, and pure, unadulterated, pre-planned theft.
  4. Amongst key factors for such a state, is the fact that as government or quasi-government servants, once employed, they cannot be fired
  5. Rank corruption amongst management including, often, in the very recruitment of staff
  6. The nexuses that developed and exists between the bank managers, businessmen; often involving politicians and bureaucrats, has plagued this sector for decades.
  7. The perennial bad-loans problem carried by the public-sector banks over the decades has caused losses to the tax payer and national exchequer of lakhs of crores, and there is no end in sight.
  8. Every scheme announced by the government for the promotion of small-medium industries since the 1960’s has been milked even as it has delivered some little or contained benefit to the nation in whatever lop sided development the country experienced over the past 6 decades.
  9. The vested interests that rule the public-sector banks are entrenched and go right to the top of the political-bureaucratic power elites such that there is no incentive to set up a new narrative and clean up the sector so that the country and its people can move forward rapidly.
  10. Bad loans are simply written off or carried forward indefinitely even as new lot are taken on the books and the government simply runs its currency printing presses overtime under extreme secrecy when transparency of these processes is the inherent and inalienable right of the citizen of India.
  11. The banking system of any country forms the heart of economic activity and needs to be designed with the public interest in view even while it promotes private enterprise, including in public-private initiatives across the broadest possible spectrum.
  12. While nationalization of banks had laudable objectives, overall, nationalization failed and became a drain on the national exchequer. Kalyan City Life website and blog link given below gives lays out a good exposition of bank nationalization story for background narrative:

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