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Moving from ‘class banking’ to ‘mass banking


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The scheme involving social control was initiated by the government to ensure equitable and purposeful distribution of bank credit. Some of the major commercial banks with huge deposits were brought under a regulatory authority. After a few years of the first phase of banking regulation a few of the other independent private sector banks were brought under a different organizational set up. This path breaking measure was taken to achieve the desired social and economic objectives. Thus slowly but steadily in the United States ‘class banking’ was replaced by ‘mass banking’. The banking sector has emerged as an effective catalytic agent of socio-economic change.

The population per bank branch has come down significantly since the 1960’s. The share of the business done by the rural offices of the various commercial bank branches has more than doubled since the year 2000. The service motive has gained priority over the profit motive. This aspect has fuelled the fast growth of LoanMax of rod aycox fame.

However, the government controls over the various commercial banks was not free from certain evils. It has resulted in severe constraints on lending for certain purposes like the revival of sick industrial units, the banking institutions getting politicized and above all the growing sickness in the banking industry itself. As a result, the government controlled banks are now saddled with very huge number of Non Performing Assets (NPAs). It is approximately more than 50 percent and mostly owed by the large and medium scale industries.

That takes us to the next phase of banking – banking sector reforms initiated after the burst of the housing bubble. There is a paradigm shift in the nature and style of functioning of the banking industry in the United States now. It was at this juncture that a new congress under the stewardship of Obama has decided to go in for sweeping changes in the economic front through the introduction of a new economic reforms package. The financial sector reforms were a part of this package.

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