Manoj Kumar Sharma
This has a reference to the editorial under topic “Automated Teller Machine or Always Tension Machine” published in DE on 12.08.2012. The views of the author seem to be mere figments of imagination, through which he has unsuccessfully tried to spew out seemingly personal discontentment, targeting banking fraternity as a whole.
The author has asserted that bank (whole Banking Industry) is not some independently created department like many other departments in the system. I want to correct the author by reminding him that in-fact no department in any system, unlike banks, is independent but all departments of the so-called system of society are interdependent on every other department for existence and survival and banks are no exception, being a vital part and parcel of the system and society.
Banking is in-fact, one of the most ancient and crucial departments of civil society with its first prototype in the ancient world having begun around 2000 BC. The Banks do play an important and active role in the prosperity of general masses and economic development of a country which I want to briefly enumerate as under, for the knowledge of all:
Banks promote capital formation: Banks accept deposits from individuals and businesses, these deposits are then made available to the individuals and businesses which make use of them for productive purposes in the country. The banks are, therefore, not only the store houses of the country’s wealth, but also provide financial resources necessary for economic development of nation and masses.
Investment in new enterprises: Businessmen normally hesitate to invest their money in risky enterprises. The banks provide short and medium term loans to entrepreneurs to invest in new enterprises and adopt new methods of production. The provision of timely credit increases the productive capacity of the economy.
Promotion of trade and industry: With the growth of banking, there is vast expansion in trade and industry. The use of bank draft, cheques, bill of exchange, credit cards and letters of credit etc has revolutionized both national and international trade.
Development of agriculture: The banks particularly in developing countries like India are providing credit for development of agriculture and small scale industries in rural and semi-urban areas. The provision of credit to agriculture sector has greatly helped in raising agriculture productivity and income of the farmers.
Balanced development of different regions: The banks play an important role in achieving balanced development in different regions of the country. They help in transferring surplus capital from developed regions to the less developed regions. The traders, industrialists, etc. of less developed regions are able to get adequate capital for meeting their business needs. This in turn increases investment, trade and production in the economy.
Influencing economic activity: The banks can also influence the economic activity of the country through its influence on a) Availability of credit, b) The rate of interest. If the banks are able to increase the amount of money in circulation through credit creation or by lowering the rate of interest, it directly affects economic development. A low rate of interest can encourage investment. The credit creation activity can raise aggregate demand which leads to more production in the economy.
Implementation of Monetary policy: The Central Bank of the country (RBI in our case), controls and regulates volume of credit through the active cooperation of the banking system in the country. It helps in bringing price stability and promotes economic growth with-in the shortest possible period of time.
Monetization of the economy: The banks by opening branches in the rural and backward areas are reducing the exchange of goods through barter. The use of money has greatly increased the volume of production of goods. The non monetized sector (barter economy) is now being converted into monetized sector with the help of banks.
Export promotion cells: In order to increase the exports of the country, the banks have established export promotion cells. They provide information about general trade and economic conditions both inside and outside the country to its customers. The banks are therefore, making positive contribution in the process of economic development.
Role of Banks in 21st century: The banks are now not confined to local banking. They are fast changing into global banking i.e., understanding the global customer, using latest information technology, competing in the open market with high technology system, changing from domestic banking to investment banking etc. The banks are now considered the nerve system of all economic development in the country.
Virtual Banking: Providing the banking services through extensive use of information technology without direct recourse to the bank by the customer is called virtual banking. The origin of virtual banking can be traced to the 1970’s with the installation of ATM’s. The principal types of virtual banking services include automated teller machines (ATM’s), Point of Sale terminals (PoS terminals), mobile banking and most recently internet banking or e-banking. With the increasing use of internet banking there is greater reliance now on information technology and the decrease of physical bank branches to deliver the banking services to the customer.
(The author is Branch Head, J&K Bank)
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