Transformations in Banking system

gowritells By gowritells, 21st May 2015 | Follow this author | RSS Feed
Posted in Wikinut>Writing>Columns & Opinions

As and when we need to secure our finances including jewellery,documents of properties etc, the best place we find are the banks.The whole article provides a brief description of how the banks developed and got transformed to the one we find today.

Banking system (before and after Independence in India)

Before reading further lets know all about bank crisis in the link provided :- Bank crisis this gives a brief introduction of the problems faced by the banking system and now we can move on to know how the organization managed to transform to give successful output.
Public didn't have the required awareness of the banking system prior to Independence in India.There was not much knowledge about banking and most of the money was secured by people themselves in their homes in huge boxes made of brass or wood.Some even safeguarded the jewellery by digging a corner of a room and storing the wealth there,these were again covered by heavy cement or Iron slabs. There was not much known about the banks and the banking system.

The whole responsibility of securing the wealth was made by head of the family.This process continued until there was huge loss incurred due to natural calamities or robberies and it was highly impossible for the public to get back the wealth.
People wanted a more safe and secured place to store their wealth and this was the beginning of the BANKING ERA.
Now people could not only store but increase the amount deposited through the banks which was not possible if they secured their wealth at home or other places.

But, though there were a few banks, public was unaware of the system and would not use the resource available properly. This, led to the low business rates and gradual decrease in the deposits and high amount of loss in banks.
Banks faced many failures soon after Independence.

After Independence, the government of India had to launch economic planning since 1951.The entire banking had seen the drastic transformation through several important reforms introduced by the government like bankruptcy and Merging of banks, Banks' nationalization,Structural changes in commercial banking and ultimately new strategies in banking business.

Transformation in banking system

After Independence when there was consistent failure in the banking system, the Reserve Bank of India adopted a deliberate policy of systematic elimination of weaker and uneconomic banking units to reduce the rate of failure in the banking system and ultimately reach the expected level of marketing in the system.

This was done by restoring to re-licensing the banks.
Most of the banks would be restored by providing new strategies and by re - licensing.
It was necessary to merge such banks in order to strengthen the banking system
in the nation.The process is termed as AMALGAMATION or the merging of banks.

Usually when there are small units, which need to reach targets, they take
a time period more than expected.This happens because of the less number
of employees working under the unit.
Such banks had to be restored by increasing the number of employees.
More the number of employees lesser the time taken.
So, due to the inadequate number of employees, they took more time to
accomplish a task.

Merging of banks :-
Thus, it was necessary to merge such small units to complete work in a given time period and set targets to the large number of employees when there was insolvency.
This led to the Amalgamation or the merging of the small units into a large group to complete the given work in a given time period.

The continuous failure in banking system led the government to insert a new section,Section 45 in the Banking Companies Act in 1960.It says that, the government of India, on recommendation of RBI, is empowered to order the compulsory amalgamation of weak banks with strong well-managed banks.
Thus, there was growth in the banking sector and decrease in failures in banking process.

The growth in the banking sector led to the new laws to be followed by the merged banks to show more success in the banking sector.Thus, there was a change in the legislation of the banking process and these were to be followed by employees as well as customers.

The increase in the growth of the banking sector, led to the Nationalization of the banks and there were many branches which brought under the ownership of a single body or a nation and thus the banks were Nationalized.

The increase in the number of employees and the changes in the legislation, in the banking sector led to the structural changes in banking and there were also infrastructural changes in the banks.
More preference is being given to the Ambiance of the banks. The banks were now more interested to attract more and more customers and work according to the needs of the public taking into consideration.The banks were now,more customer friendly.
They could incur high interests for the deposits and there were also new schemes provided for the public which led to increased profits both for the customers as well as banks.

The structural changes led to the decline of the foreign banks as the nationalized banks were able to capture the customers by new strategies and more customer friendly activities.

Use of Technology and banking system

And finally the recent development in the increased use of Technology has also led to the increase of depositors.The use of COMPUTERS, has decreased the waiting time for the customers.
Public is guided by the USER FRIENDLY MAY I HELP YOU boards which makes it easy for the customers to know the process and get the work done easily.
Increased use of DEBIT AND CREDIT cards helps the public in getting the required money to pay bills, as and when needed without the risk of loosing it.People can now carry huge amount of money by holding a single card with them which has decreased the risk of loosing or burden of carrying the money in bags and briefcases and loosing them.Public can even get the amount required by swiping the ATM cards.

Such facilities have provided an increase in success of the banking system and thus the easy access of the amount has also made the banks more reliable and comfortable for the public.


Bank Account, Bank Loan, Bankers, Banking System, Bankruptcy, Banks

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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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author avatar Retired
6th Jun 2015 (#)

Interesting post. Thanks for sharing.

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