Abstract
Banks have been playing a significant role in determining the speed and nature of economic progress in India. Banks reallocate funds from savers to borrowers and thereby finance economic growth. At the time of independence, India had a well developed banking system with nearly 650 banks mainly catering to the needs of industries. However its activities were mainly concentrated in urban centers. The nature and working of these
banks gradually changed in course of time. Nationalization and financial sector reforms were important milestones that determined the evolution of present banking system. After the nationalization of Reserve Bank of India and Imperial Bank, fourteen major banks with more than Rs 50 crores were nationalized in 1969. Six more scheduled
commercial banks were nationalized in 1980. The banks had expanded their business and increased their number of offices. However these banks were not serving the public interest and failed in providing credit for the deserving. Instead they were acting as tools in the hands of big corporate. It was under these circumstances banks were nationalized. However, reform measures initiated during 90s made revolutionary changes in the banking sector. The recommendations of Narasimham Committee deserve special mention. Reforms touched almost all aspects of banking activity. Banking activities spread far and wide which gave impetus to almost all sectors of the
economy. However the industry is now struggling hard to address the problem of large non Performing Assets (NPA). Mounting NPAs is a matter of serious concern for most banks especially Public Sector Banks (PSB). NPAs erodes away the capital and profitability of these banks.
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