Bank Crisis

gowritells By gowritells, 19th May 2015 | Follow this author | RSS Feed
Posted in Wikinut>Writing>Columns & Opinions

As in every organization, there are set backs in banks and these need to be tackled or handled carefully as its not the problem of a single entity but the whole organization and the customers of the banks.

Problems in banks

Earlier we have discussed about the Origin of banking in India which has enhanced our knowledge about how banks originated in India and now we can know more about the details here.
Till the middle of the 12th century, Indian joint stock banking system had seen a continuous growth .
However, the banking experienced severe set backs during the period 1913-1917. During this period at least 108 banks failed in getting the profits or performing up to the requirement.
During 1922 to 1936 ,about 373 banks failed in performing or showing good business.
During 1937 to 1948, not less than 620 more banks failed to achieve the required targets.
The central Banking Inquiry Committee in 1929 traced the following causes for the banks' failures in India.

1.Insufficient paid-up capital and reserve.
2.Irrational credit policy causing reckless and injudicious advances.
3.Poor liquidity of assets
4.Mismanagement
5.Creation of long term loans on the basis of short term deposits.
6.Indulging in speculative investments.
7.Absence of overall supervision and control.
8. Lack of suitable banking legislation for regulation of banks.
9.Crash of A.B.C banks.
10.By the time of Independence in 1947, India inherited an extremely week banking
structure , with urban banking structure,loan to relatives and trade sector
only, restricted to only one geographical area, loosing the ALL- India structure..

Thus, its unfortunate that banks could not overcome these problems all at a time and it took a lot of time to regulate the whole system and getting the required results.
Thus, there was a development in banking during the planning era which will be discussed in the next article Transformation in banks

Tags

Crisis In Banks, Risk Management, Set Backs

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author avatar gowritells
writing is my passion and I am glad when readers find my pages interesting or inspiring.

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