75 years of Banking Regulation Act, 1949

EPW - Vol 59 - Dec 14, 2024

Chronology of acts

1850 - Companies Act 1934 - Reserve Bank of India Act 1949 - Banking companies Act 1966 - renamed as Banking Regulation act

History

Pathetic situation of banks in India over 365 banks failed during World War II 207 banks failed during 1946 - 1950 banks failures continued till 1951 Nationalisation of banks in 1955 - Nehru 1969 - Indira Gandhi 1980 - Entry of private banks in 1990s

But still a large population of the country remained out of the banking system for a prolonged period denying many households the opportunities to increase their productivity and come out of poverty.

Problems

Rise in complaints of cyber frauds

Deposit mobilisation scheme doesnot seem to be a competitive one

The availability of 24 * 7 online banking services has posed new challenges for banks in liquidity management due to feasibilty of the quick deposit movement

Suggestions

The policy makers should decide as to how and to what extent the usage of artificial intelligence and machine learning should be regulated in banks

Status of Indian banks at global level

A major drawback is that Indian banks have remained small compared to big global banks, with only one bank in the top 50 (45th) and 2 in the top 100, despite the size of the economy and population of the country

Our credit - GDP ratio is arond 51%, which is way less than 100% and more for most large and advanced economies.