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Essay Writing-- Social Banking

A social bank is the one concerned mainly with the social and environmental impacts of its investments and loans. In Social Banking, the focus is on satisfying the needs in the real economy and the society whilst .simultaneously taking into accounts their social, cultural, ecological and economic sustainability.
                The banking system touches the lives of millions and has to be inspired by larger social purpose and has to subserve national priorities and objectives such as rapid growth of agriculture, small industries and exports, raising the employment levels, encouragement of new entrepreneurs and development of backward areas. For this purpose it is necessary for the Government to take direct responsibility for the extension and diversification of banking services. Thus an essential feature of the Indian banking programme has been to lay adequate emphasis on bank lending towards sectors deemed as priority sectors, which include agriculture and small scale industries, and within these sectors to individuals belonging to weaker sections of the society. The opening up of Indian market to greater international competition, has thrown both challenges and opportunities for the SSI sector. Low capital base can make these Units vulnerable to external shocks more easily.
                The genesis of the importance of social banking is enshrined in the central objective of planning in India as designated in the First Five Year Plan - "to initiate a process of development which would raise standards and open out to the people new opportunities for a richer and more varied life" necessitating the banking institutions to contribute to the process of ensuring growth with equity. The need to reconcile economic efficiency with social equality and distributive justice to achieve growth will have a tangible impact on poverty alleviation, became apparent. Development as a process must lead to the augmentation of the value of human versus social capital, physical vis-a-vis financial capital and environmental capital.
Why Social Banking?
                It is increasingly accepted that business should not operate on the expense of but contribute to the wellbeing of the community at large. With the Society being even more conscious and informed about the behaviour of business organizations, to stay successful, business organizations will have to take into account not only the needs and objectives of their stockholders but also of all their other stakeholders.
In this context, social banking can be considered a successful example of an organizational model that not only creates economic t also social and environmental value. Social banks enable their depositors and investors to achieve a financial return whilst simultaneously channeling funds to borrowers or investees who are assumed to have a positive impact on the society. These banks usually disclose their loan and investment portfolio, to the wider community in a very transparent and detailed way. This provides a sound basis for the bank's stakeholders to assess whether or not the bank's core activities still meet their expectations. Thus social banking can be seen as contributing to more transparency and a democratization of financial and economic processes.
India's Social Banking Experiment
                The period till 1969 can be termed as a transitory period when India moved towards social banking and nationalization. On 19th July, 1969, fourteen largest commercial banks were nationalised. The nationalization of the banks is considered at as a historic step taken to ensure adequate credit flow into genuine productive areas in conformity with Plan priorities. During the period till 1969, the Indian banking system made considerable progress but there remained a large number of unbanked areas especially rural and semi-urban areas. A large portion of the credit facilities were still the prerogative of large industries. The sectors now well known as Priority Sector such as agriculture, small-scale industries and exports remained the last priority of the banking sector.
                In 1977 the Indian central bank mandated that for every bank opened in an already banked location a commercial bank must open four in unbanked locations. This rule was removed in 1990. Between 1971 and 1990 this rule caused banks .to open more rural branches. The rural bank expansion programme had a significant impact on savings mobilization and credit disbursement in rural India. This branch expansion was an integral part of India's social banking experiment which sought to improve the access of the rural poor to cheap formal credit. The rapid increase in the Indian rural branch network and rural credit and savings share after bank nationalization in 1969, and the subsequent slowdown post 1990 has been widely documented. However, evidence on the economic impact of social banking programme remains mixed. One school of thought that holds pessimistic view of social banking believes that state control of the banking sector implies political, not economic, consideration to determine the flow of credit across and individuals.
In short social banking provides the basic financial support required by the economically weak sections of the society and thereby enables them to participate and benefit from the developmental programmes. Once this is achieved, social banking leads to desired goal of sustainable development. Social banking plays pivotal role for poverty alleviation through the network of commercial banks, cooperative banks, Regional Rural Banks (RRBs), microfinance institutions, primary agriculture credit societies and Self Help Groups (SHGs). However, availability of credit alone cannot alleviate poverty. Several other reforms are too needed like land reform which would better enable absorption of microfinance. But in any case, banks and financial institutions do ensure flow of credit to the poor to strengthen their economy.
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