A welfare state is a state which not only governs the people but also serves them in practically every field of life. It is not satisfied merely with maintaining internal law and order, or with protecting the country from external attack. Its scope of activity is much wider. It seeks to promote the welfare of the people in various ways. It tries to secure maximum good for the maximum number of people. It seeks to increases production, generate opportunities for employment and also ensure that the fruits of production are equally distributed among the various section of society. It tries to promote socio-economic justice by controlling the means of production and distribution as well as other economic institutions. Obviously in such a welfare state, financial institutions, like the banks, have to play a key role. It was this realization of the crucial role of banks in the welfare state as India certainly is, that promoted late Mrs Indira Gandhi to nationalize the fourteen major banks of the country and several other banks have since been nationalize. Since then banks have become major instruments for the promotion of socio-economic justice and the welfare of the people at large. Banks are now playing a crucial role in bringing about all round development of all sections of society both in the city and the countryside. Banking industry today is the largest industry in the country with the various banks having their branches not only the cities and towns but also in remote villages, and even in localities which are not easily approachable. They are serving the people in the real sense of the term and the sphere of service is rapidly widening. They now cater to the needs of the poorest of the poor. They encourage small saving through door to door collection. They must make the people make bank minded by making them understand the advantages of keeping their savings in banks. In this way, they help the poor and the ignorant to make provision for the rainy day. They thus ensure a healthy and happy feature for them.
Not only are banks places where the money of the people in secure, and where it also earn handsome interest, they are also institutions which advance loan to the needy on easy terms. The credit of dealing a knockout blow to greedy money-lenders must go to the banks. They have feeds the poor, more particularly the weaker sections of society, from the clutches of the money lenders who exploited them by advancing loans to them at exorbitant rates of interest, and by compelling them to pledge their ornaments as security. Since they were never able to repay the loans, they had to forfeit their ornaments. Banks have put an end to this sort of cruel and blatant exploitation. The proverb “Once in debit, always in debit” is no longer true. By advancing loans on easy terms, Banks have freed the poor and the needy from the clutches of private-lenders. ‘Loan meals’ are now frequently organized in which loan are distributed to the needy. Through such ‘meals’ it is ensured that the money reaches directly the hand of the borrower, and the ‘Netas’, ‘brokers’ and other middlemen do not pocket a percentage of it.
The loans thus advance contributes a great deal to welfare of the people. They help to generate employment and increase production. The determining factor for advancing such loans is nit the capacity of the borrower to return it, but whether the loan so given to the unemployed or to the partially employed seeks to establish some cottage industry. Thus loans are given to the rickshaw-puller for purchase of rickshaw, and the loans carry nominal rate of interest and returnable in easy installments. Sewing machines are given to the womenfolk of the poor so that they may work in their cottages and thus augment the family income. Loans are also given, for the purchase of equipment for running some approved cottage industry, for the construction of houses, and for a number of other purposes. Through such loans, Banks make a significant contribution to the health and well-being of the common man.
Banks also remove the distress of the farmers and help them to increase agricultural production. Indeed, Banks played a significant role in bringing about the “green revolution” and now they are promoting the cause of the ‘white revolution”. Loans are given to the framers for the purchase of seeds, fertilizers, tractors and other useful machines, for the construction of tube wells etc. loans are also given for the purchase of buffaloes, cows etc., and for establishment of poultry farms. At other times a bank adopts some particular village and spends money for the uplift of that particular village. Loans are also advance to the handicapped and thus they are helped to become independent and self-reliant. Recently, banks have contributed lotto welfare of the handicapped by providing them with artificial limbs.
In short, the role of banks are entirely changed and grown much wider and more significant. They are no longer merely institution where money can be deposited and from where those in need of money can borrow it at a high rate of interest. They do not longer make huge profits but have become instruments of social justice, in the true sense of the world.