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Monday, 24 September 2012

What were the causes of nationalization of banks in Pakistan



The Govt. of Pakistan nationalized all the banks, on 1st Jan. 1974. The weaker banks were merged with the strong banks.

Following were the main causes of nationalization :

1. Fair Distribution Of Credit :-
The banks were nationalized to provide the fair distribution of credit. All the classes of the public will enjoy the credit facility.

2. End Of Monopoly Over Banks :-
There was a complete hold of few capitalists over the public savings. Now after nationalization their monopoly finished.

3. Fall In The Rate Of Hoarding And Smuggling :-
Before the nationalization few big capitalists were missing the savings of the whole nation. They used this credit for smuggling and hoarding and they looted the public from both hands.

4. Financing To Agriculture :-
Before nationalization this sector was ignored but now after nationalization proper importance is given to this sector. Now output of this section is increasing day by day.

5. Credit For Small Industries :-
It was also stated that credit needs of the small businessmen can be me if the banks are in the public sector.

6. Service Motive :-
Before nationalization, there was only profit motive for the bankers and service motive was ignored.

7. Mobilization Of Resources :-
It was also claimed that nationalization of banks will encourage and stimulate mobilization of savings in the country.

8. Social Justice :-
It was also claimed that nationalization of banks will provide social justice in the country by proper  allocation of credit to the different classes of the society.

9. Improvement In Efficiency :-
When the credit facilities will be provided to the underdeveloped  areas the marginal rate of capital return can increase. But it was possible only if the banks were nationalized.

10. Price Stability :-
It was also claimed that state bank can minimize the fluctuation in the economic activity with the help of nationalized commercial banks. So price stability can be provided by not issuing credit for the hoarding and smuggling.

11. Increase In Production :-
Nationalization to take loans for different development projects. In this way total out put of the country can increase.

12. Abolition Of Malpractices :-

The banks were nationalized to stop the malpractices of the bank owners like heavy advances to the directors and their friends and misuse of foreign exchange.

13. Security To The Depositor :-
The banks were also nationalized on this ground that public will feel more security in depositing the money in nationalized banks.

14. Check On wasteful Competition :-
It was also claimed that the commercial banks compete with each other and spend a huge amount of money on advertisement, costly furniture and buildings. If these are nationalized then this loss can be sloped.

15. Uniform Policy :-
It was argued that all the banks will adopt uniform policy about credit expansion after nationalization. While before nationalization it was no possible.

16. Islamisation Of Banking :-
If the commercial banks would be in the private sectors then Islamic Banking System introduction would be very difficult.

17. Use Of Credit :-
Before nationalization all the profit of the bank industry was in few hands but after nationalization it is used for the best interest of whole nation. So Govt. nationalized them in 1974.

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