DEPARTMENT OF TECHNICAL

EDUCATION,A.P.
Name : P. Samba Murthy,
Designation : Head of Department

Branch :D.C.C.P.
Institute : S.R.R.S. Govt. Polytechnic, Sircilla,
Karimnagar District
Year/Semester : V Semester
Subject : Banking – I
Subject Code : CCP- 504(B)
Topic : Indian Banking Industry – Growth
Duration :50 Minutes
Sub-Topic : Evaluation of Nationalization Vs
Privatization
Teaching Aids : PPTCCP504(B).35 1
Objectives
 On completion of this period you would be able to

 Understand the evaluation of privatization of Banks

CCP504(B).35 2
Recap

 So far, we have discussed at length with regard to

the causes of Low-Profitability of Banks in Pre-
reform Period.
 Now let us learn about the evaluation of
privatization of banks in India.

CCP504(B).35 3
Introduction

 There has been a marked changes in the

perception towards the role of privatization.
 The government’s attitude also changed
markedly in the technical and service
competence. Serious problems are observed in
the insufficient growth in and inadequate
attention in the public sectors.

CCP504(B).35 4
 PRIVITIZATION

 Though the government has advocated

privatization of public sector and the evolution of
privatization policy in India since the start of
economic liberalization, critics express fear about
some of the adverse effect of privatization of
banks.

CCP504(B).35 5
 PRIVITIZATION

 Privatization of public sector banks may result in

the retrenchment of exploitation of existing
employees.

 Privatization may lead to concentration of wealth

and economic power in the hands of a few rich
only.

CCP504(B).35 6
PRIVITIZATION

 Private Banks may not faithfully observe the

policy or guidelines of R.B.I. and thus may not
bring about the context of economic growth of
the economy.

CCP504(B).35 7
PRIVITIZATION

These banks may lead to the misuse of banks

funds because the vast resources of the banks will
be utilized by businessmen for speculation and
hoarding of essential commodities.

CCP504(B).35 8
PRIVITIZATION

 Privatization will prevent the government to

acquire control over the vast deposits of the
public which can be put to productive uses to
achieve the wider objective of a welfare state.

CCP504(B).35 9
PRIVITIZATION

Privatization of banks will discourage the opening

up of new branches in the rural and unbanked
sectors of the economy and thereby prevent the
mobilization of saving from these areas.

CCP504(B).35 10
PRIVITIZATION

 Private Banks will not cater to the financial

requirements of agriculture and small-scale
industries.

 Privatization of banks will promote profit motive

and shareholder’s interests.

CCP504(B).35 11
 PRIVITIZATION

 Privatization will have the evil effect of black

money and concealed income and wealth.

 Privatization of banks will weaken the R.B.I. to

control credit efficiently and effectively in the
interests of the economy.

CCP504(B).35 12
PRIVITIZATION

 One of the genuine fears of labour is that

privatization is bound to result in unemployment.

 Most of the privatization experiments around the

globe are testimony to the fact that this indeed
does happen.

CCP504(B).35 13
 PRIVITIZATION

 One of the important aspect is that the

privatization of public sector banks is the belief
that this would improve their performance.
 However, some critics have pointed out that
there is no positive relationship between
ownership and performance.

CCP504(B).35 14
Summary

 The policy of the privatization ushered in a new era

of liberalization, role of public sector diluted, doors
to foreign investment concededly opened and
numerous incentives and initiatives granted to the
private sector to expand its business activities.

CCP504(B).35 15
Frequently asked questions

 Evaluate the privatization of banks.

 Evaluate the functioning of banks after
privatization?

CCP504(B).35 16