An Analysis of Consolidation of Banking System in India

Authors

  • Dr. Sunil Joshi

Abstract

Banking sector plays an important role for the economic growth of all developed, developing and under developed nation. Although there is no universally accepted definition of a bank, in simple language, a bank is a financial institution that works to protect the public's money in which people deposit money and can withdraw it when needed. The bank also pays interest on the deposit amount. The functions of banks include depositing funds, providing loans, locker facility for jewellery and other valuable items, collection and payment of checks. Apart from this, currently banks also provide demat facility, mutual funds, insurance etc. facilities. Some of the public sector banks are in constant loss. The cure is either to stop them or to merge them with each other. The government is of the view that by merging the loss-making banks with the strong banks, the situation can improve. Experts believe that competition in the banking sector is constantly increasing in the coming time. In such a situation, it will not be easy for small banks to stay in the market. One advantage of bank mergers is the reduction in management expenses. This will reduce the number of people associated with the management at the above level, including the directors of banks. After the bank merger the number of surplus employees in the proposed bank can be reduced. Each other's resources can be used. The mutual income from assets will help in reducing the losses of banks. Experts believe that if a bank is continuously in loss then it is necessary to merge with another bank. If steps are not taken, then in the long-term it can prove to be dangerous for the country's economy.

Published

2020-06-30

Issue

Section

Articles