Why India would be well-advised not to mindlessly privatize its banks

Why India would be well-advised not to mindlessly privatize its banks

Sujay Rao Mandavilli

 

Let us begin this article by tracing the history of banks. The history of banking is thought to have begun with the first prototype banks that emerged in the ancient world, with merchants giving loans to farmers often in the form of grains or life stock, and traders who transported goods across regions. This was around four thousand years ago, in regions such as Assyria, India and Sumer. Several centuries later, both in ancient Greece and during the Roman Empire, lenders gave loans, while accepting deposits and performing the change of money. Most research carried out in the economies of ancient China and India also show evidences of money lending, and transactions were often carried out in or around temples, and other places of worship.

According to many scholars, the roots of modern banking began in medieval and Renaissance Italy, particularly around the Italian cities of Florence, Venice and Genoa. The Bardi and Peruzzi families dominated banking in fourteenth century Florence, gradually establishing branches in many other parts of Europe, as the concept of banking spread widely across the region both within Italy and across Europe. The most famous Italian bank was the Medici Bank, established by Giovanni Medici in 1397. The oldest bank still in existence is Banca Monte dei Paschi di Siena, which is headquartered in Siena, Italy, and which has been operating continuously since the year 1472. Until the end of 2002, the oldest bank still in operation was the Banco di Napoli headquartered in Naples, Italy, which had been operating since 1463. Following the acquisition of the bank at the end of 2002 by the Sanpaolo IMI group, in 2003 the bank changed its name to "Sanpaolo Banco di Napoli". In 2018, the Bank of Napoli was officially closed and integrated into the "Intesa Sanpaolo"

Later, a number of important innovations took place in Amsterdam during the Dutch Republic in the seventeenth century, and in London since the eighteenth century. London gradually became the financial centre of much of the western world, though it has since been eclipsed by other cities in the west, and later, Asia. Many banks collapsed during the Great Depression, and the banking system as such was not bullet-proof reliable. During the second half of the twentieth century particularly, rapid and impressive advances in telecommunications and computing caused major changes to banks' operations and let banks dramatically increase in size and geographic spread. The 2008 financial crisis also led to many bank failures, including some of the world's largest banks, and this unfortunate event provoked much debate about bank regulation.

Let us now trace the history of banking in India. Seals were present in the Indus valley civilization, and we do not know their use for certain, though hypotheses persist. Perhaps, they served administrative and trading functions, though some scholars offer other explanations. In ancient India there are evidences of loans from the Vedic period beginning around 1750 BCE. Later during the Maurya dynasty beginning in the fourth century before Christ, an instrument called Adesha was in use, which was an order on a banker desiring him to pay the money of the note to a third person. This corresponds to of a bill of exchange in the manner that we understand it today. Merchants in Ancient India also began to offer loans and advances to each other, and trade and commerce began to spread widely.

Modern banking in India originated in the middle of the eighteenth century, when India came under the rule of the British East India Company. Among the nations first banks were the Bank of Hindustan, which was established in 1770 and liquidated around the period 1829–32; and the General Bank of India, established in 1786 but failed in 1791. The largest and the oldest bank which is still in existence India is the State Bank of India . It originated as the Bank of Calcutta in 1806. In 1809, it was renamed as the Bank of Bengal. This was one of the three banks founded by a presidency government, the other two being the Bank of Bombay in 1840 and the Bank of Madras in 1843. The three banks were merged in 1921 to form the Imperial Bank of India, which upon India's independence, became the State Bank of India in 1955 with the passage of the SBI Act. For many years, the presidency banks had acted as quasi-central banks, as did their successors, until the Reserve Bank of India was established in 1935, under the Reserve Bank of India Act, 1934. This became India’s central bank, and remained a largely independent and autonomous entity and body.

Nationalization of banks refers to state ownership of banks in terms of equity. In 1960, the State Banks of India was given control of eight state-associated banks under the State Bank of India (Subsidiary Banks) Act, 1959. However the merger of these associated banks with State Bank of India went into effect on 1 April 2017. On the twentieth of July 1969, the Government of India effected its first tranche of nationalization by nationalizing fourteen major private banks; one of the big banks nationalized was the Bank of India. In April 1980, six more private banks were nationalized. These nationalized banks were the biggest in India in terms of both operations and lending. The nationalization of banks in India was an epochal event that redefined the Indian banking landscape. Though it brought several benefits, it also faces some criticisms. For one, nationalization of banks helped achieve India’s economic goals post-independence, and helped it achieve rapid industrialization. It also helped banking penetrate to smaller towns and rural regions, and made the banking system highly stable and free from nefarious private activities. Other benefits of the nationalization of banks in India were enhanced social welfare, reorientation of lending priorities, erosion of the power of private monopolies and greater financial inclusion of the poor.

Criticisms of nationalization of banks have included allegations of sloth, bureaucracy, political interference, and inefficiency. Some people argue that there was a lack of competition, though this has mostly not been the case.  Of late, there have been attempts to privatize Indian banks. The privatization of banks in India involves reducing the government's majority stake in nationalized banks in order to allow private investors greater control and ownership, as was announced in the Union Budget of 2021-22 based on the earlier 1991 Indian economic reforms. The stated goals of privatization were the need to improve efficiency, reduce the government's financial burden, foster healthy competition among banks, and attract private investment into the banking sector in order to meet economic growth needs. The zeal with which governments privatized banks appears to have reduced, and there appears to be some form of introspection taking place not withstanding renewed efforts in 2025.

There is a wide variation of rules in different countries as far as the banking system is concerned. The US banking system is generally seen to be weak in most areas, and the US is generally driven by conservative right-wing ideology. The US banking system is a dual system with federal and state-chartered institutions overseen by a range of regulatory bodies, led by the central bank, the Federal Reserve System. The Federal Reserve conducts monetary policy, regulates banks, maintains financial stability, and provides financial services to the government and other institutions. Key players include the Federal Reserve Board of Governors, the twelve Federal Reserve Banks, and the Federal Open Market Committee (FOMC). Deposit insurance, managed by the FDIC, protects consumer deposits, and the structure includes a variety of institutions like commercial banks, credit unions, and savings banks. 
Weaknesses in the US banking system include vulnerability to high-interest rates causing unrealized losses on assets and loan defaults, exposure to uninsured depositor runs, risks from commercial real estate loans, cybersecurity threats, regulatory burdens, and competition from FinTech. Additionally, challenges include managing non-performing loans, the cost of legacy systems, potential for unethical behavior, and the economic fallout from geopolitical tensions. 

The American banking system significantly contributed to the Great Depression through widespread bank failures, bank runs, and a contracting money supply, exacerbated by Federal Reserve policy that failed to act as a lender of last resort. Over nine thousand banks closed between 1930 and 1933 which was the peak period of the Great depression, leading to a massive loss of public deposits and creating a vicious cycle of declining consumer spending and business investment due to the lack of available credit. The lack of effective regulation in lending, coupled with a belief in maintaining the gold standard, led the Fed to raise interest rates and reduce the money supply, worsening the deflationary spiral and the economic collapse. Of late, the financial position of many Indian banks has improved considerably, and customer service has also improved. We must take in the best aspects of other banking systems, not the worst ones. India’s bank nationalization effects have provided many benefits to the banking public, and to the economy. In summary, India should make its banking system stronger, not privatize banks mindlessly. Of course, private banks can continue to operate under strict government regulation.

Towards human resource-driven economic models for India and other developing nations

 

Towards human resource-driven economic models for India and other developing nations

Sujay Rao Mandavilli

Human Resources in the context of national development refers to the management of an nations most valuable asset, namely its people. The ministry responsible for this function oversees the optimization of  human resources in the nation, along with continuous and comprehensive skill development. This has become particularly important since the emergence of the orange economy, and the emergence of white collar workers a couple of decades ago, replacing some types of blue collar workers, or existing in parallel with them. We also have skilled labour, and super-specialized skilled labour nowadays, with a high degree of technical and non-technical career specialization.  The Human resource development ministry in a nation (HRD ministry) must therefore cultivate employees' skills, knowledge, and abilities to enhance individual, group, and national competitiveness. Human resource development also naturally sets apart successful nations from less successful ones, and is often a make or break paradigm. HRD ministries must identify specific skill requirements and skills gaps in populations, and design and implement targeted interventions like training programs, superior education systems, mentorship, off and on the job training or coaching. The goal of the above exercise would be to create a continuous, planned development process that benefits both the nation and its people immensely and multidimensionally.

Our papers and publications on pedagogy

The following are the list of our papers and publications on pedagogy. As such, we request our readers to read them in detail.  These would explain what we propose to implement, and how we propose to implement it.

1.       Intercalating a multi-barreled approach to educational and pedagogical reform: A brief summation of our publications on pedagogy IJISRT 2025:  July

2.       Embracing “Functionalism” in pedagogical theory: Why we may eventually need to justify every component of pedagogical and course content SSRN 2025:  January

3.       Rebooting Pedagogy and Education systems for the Twenty-first Century: Why we need course-corrections immediately Google Books. 2024

4.        Unleashing the potential of the ‘Sociology of Science’: Capitalizing on the power of science to usher in social, cultural and intellectual revolutions across the world, and lay the foundations of twenty-first century pedagogy, ELK Asia Pacific journal of social sciences, 2021

5.       Introducing Anthropological Pedagogy as a Core Component of Twenty-first Century Anthropology: The Role of Anthropological Pedagogy in the fulfilment of Anthropological and Sociological objectives ELK Asia Pacific Journal of Social Sciences 2018

Readers are requested to read our papers and publications on pedagogy completely, fully and thoroughly. We cannot simply repeat them a large number of times in multiple publications or blog posts. In these papers, we had discussed functionalism in education, theories of pedagogical content, AI in education, automation of education in the long term, etc. We had also discussed the need to teach logic and reasoning, scientific method, the ability to distinguish between science and pseudoscience, critical thinking skills, creative and lateral thinking skills, time and space encapsulation, etc. We had also discussed teacher training, students’ mind-orientation, comprehensive 360 degree student evaluation, cultural remediation, bridging of gaps among socioeconomic and sociocultural groups, physical fitness, career guidance as applicable, better school infrastructure including solar power generation, etc. Again, we beseech our readers to go through our paper fully- planners must implement them in stages over the course of the next couple of years. States must also draft their own education plans – this can lead to competitive rivalry, and will set apart successful states from less successful ones.  This is indeed the only mechanism by means of which developing countries will be able to catch up with developed ones.

 

Why the current decline of science in America can be a golden opportunity for science to reinvent itself

Why the current decline of science in America can be a golden opportunity for science to reinvent itself

Sujay Rao Mandavilli

 

Let us begin this post by tracing the history of science and technology in the United States in brief. Both science and technology in the United States have had a long and an impressive history, and have created a great deal of intrinsic value that has greatly impacted the whole world, and changed it fundamentally for the better. The United States of America began its existence during the Age of Enlightenment in the Seventeenth century, which was an important era in Western philosophy during which writers and thinkers, rejecting the religious-derived traditions of the past, instead chose to emphasize societies intellectual, scientific and technological underpinnings. Therefore, the United States was founded on the basis of modern and revolutionary values and principles from the very start. Enlightenment philosophers such as Isaac Newton and John Locke therefore envisioned a "republic of science," where ideas could be exchanged freely and useful and practical knowledge would greatly improve the well-being of all denizens without bias or prejudice. Scientific values were therefore enshrined in the American constitution itself. The United States Constitution promotes the need to encourage scientific creativity, and foster new discoveries. It gives the United States Congress the power "to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries." Benjamin Franklin, who was one of the founding fathers of the United States, was a scientist himself, and his personal accomplishments are indeed impressive.

American science, which was originally rooted in Enlightenment ideals and Western scientific traditions, gained significant traction and momentum in the late nineteenth and the early twentieth centuries with organizations such as the National Academy of Sciences and the American Association for the Advancement of Science promoting the advocacy of science, along with high levels of government and corporate spending and investment. Universities such as Harvard University and the Yale University were founded fairly early in American history. After the Second World War, there was an impressive surge in public interest and government funding for "big science," driven by collaboration between researchers, governments, and institutions, also driving impressive advancements in areas such as space exploration, nuclear energy, and even biology. American scientists led the world in every conceivable way, and American scientists continue to take home the maximum number of Nobel prizes in the world. While American science continues to evolve to this day, making giant strides, it often grapples with issues of funding, intellectual property rights, political dogma and ideology to name a few. It has also declined in relative terms compared to the impressive progress that has been made by China and other nations in the recent past, though it has still managed to hold some ground.

 

The success of American science therefore stems from sustained federal investment in fundamental research, which fosters and nourishes talent and the spirit of ingenuity, and drives economic growth and national security through important and path-breaking innovations and discoveries in fields such as medicine, technology, and health. This success is also bolstered by public-private partnership, and a large and well-knit research infrastructure comprising a network of research universities, national labs, and federal agencies and initiatives that strive to attract talent from other nations as well, greatly strengthening American science in the progress. Science in the USA has also greatly boosted economic growth and material prosperity. However, this widely-acclaimed model is now facing new challenges due to potential cuts in research funding due to short-sighted political ideology and dogma, besides political motivation, and competition from other nations who are now attempting to play the catch-up game. 

 

While the United States was once a the unchallenged and unrivalled global science leader and scientific hegemon, there is an increasing concern that it is currently experiencing a decline driven by significant federal budget cuts, absence of a clear vision or a long-term plan, gradual erosion of public trust, withholding of promised funds for ongoing projects, and potential brain drain as researchers consider leaving the country for greener pastures abroad. This has led to cancelled, disrupted or compromised research projects, delayed timelines and delivery schedules, closures and rollbacks of institutions and projects, and an overall reduction in the number of graduate students, creating a negative ripple effect, adversely impacting American science, national security, and the economy in the process.

  

How the current crisis can help invigorate science in the long term

Many countries have experienced ups and down in science. For example, Ancient Greece produced thinkers such as Aristotle, Plato and Socrates, while India produced the likes of Varahamihira and Aryabhatta. Likewise, there was an Islamic golden age in science between the eighth and the fifteenth century after Christ, particularly in astronomy, mathematics, and medicine, with major contributions by Ibn-al-Haytham and others, and this is now passé; while many Islamic nations have experienced an economic revival in the recent past driven by petroleum exports, there is no education or pedagogy-led scientific revival in those countries as yet. Therefore, we will make the following points in this post:

1.       Science must reinvent itself- particularly social sciences – to reflect global requirements and perspectives, and developing countries, or all those who have a stake, or a horse in the race must take the lead here, and convince other nations to comply as applicable.

2.       The United States and other western nations as the custodians of the present university system, must also concur and update syllabi as required particularly in the social sciences which is still in some ways stuck in the old “European explorers exploring primitive cultures mold. This must also naturally happen as student enrollments drop.

3.       Indeed, the present crisis in western universities must be construed as an opportunity for science to reinvent itself.

4.       There must be cross-cultural research design adopted in research studies wherever required- particularly in the social sciences going forward, and a wide range of perspectives must be taken into account. Indeed, this must become the new benchmark and the new gold standard for aeons to come.

5.       Ethnography and data-driven research must be promoted wherever possible over hunches and armchair or lounge-lizard scholarship. For example, we have had theories such as the Out of Africa theory, and old theories on ancient India that not only did not cut the ice, but were appallingly wrong. We had written extensively about this in the past.

6.       Developing countries must also collaborate with each other as required at increasing levels– we had called this horizontal collaboration, and this must continue along with vertical collaboration and technology transfer which was the norm in the past.

7.       People in developing countries must develop a scientific temper as required, and social sciences can play a major and vital role here. Social sciences have thus far not lived up to their  expectations in fostering change, as they are mostly still stuck in an archaic colonial mold.

8.       University and research networks must be fostered and promoted in developing countries over a period. This is by no means easy, but indeed it must be attempted. Developing countries must foster and inculcate vision and a clear strategy. They must also compete with each other both meaningfully and productively.

9.       Universities in western nations must not close their doors to foreign talent as diversity and inclusivity in research will be of paramount importance in the twenty-first century.

10.   Education systems must be thoroughly revamped and overhauled wherever required, on the lines that we have been writing all along, and developing countries can also take the lead here if necessary, in order to circumvent western interests.  

 

 

 

Why Indian states need to develop their own education policies, if necessary

 

Why Indian states need to develop their own education policies, if necessary

Sujay Rao Mandavilli

The objective of this post is to discuss why Indian states need to develop their own education policies if necessary because they may want to override the NEP for various reasons. This exercise would also provide states with their much needed competitive edge, and differentiate it from other ones. Let us now trace the history of education in India. The history of literacy in India begins with the Indus valley civilization. The Indus valley script, as we argued, was a logo-syllabic script – we had authored two very interesting papers to prove our case and point. This would be evident from the Dholavira signboard apart from other things.  Naturally longer inscriptions would therefore have existed. There may not have been scribes though. Scribes were associated with Royal inscriptions such as Egypt and Mesopotamia, and not the Indus valley. In another paper, we had discussed the extent of literacy in Post-Harappan India. We had therefore discussed the origin of Brahmi, the Bet Dwaraka script, Asokan Brahmi with longer inscriptions, Tamil Brahmi, Bhattiprolu Brahmi. We had also discussed Nalanda university, Taxila as an institute of higher learning.

We had also discussed the history of Madrasas in India. One of the earliest important madrasas in India was established in 1192 at Ajmer. Madrasas also flourished during Delhi Sultanate. During the Mughal rule in India, Madrasas became widespread and institutionalized, particularly in North India. It was a common practice of Muslim rulers to build mosques and religious educational institutions in the areas under their jurisdiction. Madrasas continue to exist to this day in many parts of India. However, educated Muslims do not patronize them greatly. There have been attempts to modernize Madrasas in the recent past by various Indian state governments. This was proposed to be done by teaching science, mathematics, English and modern Indian languages. Let us now fast forward to the British Raj. In the 1830’s, Macaulay prepared a report recommending halting aid for Sanskrit and Arabic education and putting in place a system for teaching science through English. He submitted his report to Bentinck on Feb. 2, 1835. Before Macaulay, education was provided in Sanskrit and Persian, besides Arabic. Sciences was not widely taught, and education was limited to the privileged few. Macaulay has widely been criticized for having destroyed India’s indigenous education system, and imposed English; This allegation has at least been made by right-wing critics in India, and a few others. However, the British policy was very lopsided. At the end of the British rule, very few Indians were literate. The Brtish education system was geared only to provide clerks for the British East India company, later the British Raj. There was only rote learning, no innovation and creativity. Yet at the other end of the spectrum there are people who praise Macaulay. Many Indians believe and claim he helped connect India with the rest of the world. The Bristish instituted many universities – Bombay, Calcutta, Madras universities, and modern science took hold in pockets and in silos. Modern science was begun to be taught in India. So far, so good. Everything has both good and bad, there are positive and negative sides to every story. The baby cannot be thrown out with the bathwater. For example, Mahatma Gandhi ruined his childrens’ lives by failing to provide them with a modern education.

 

Let us now review the Indian education system after independence. After independence many institutes of higher learning were established in India– IITs, later IIM’s. Nehru’s objective of education was to end the narrow religious rules and to promote a scientific and humanitarian mindset. Nehru was also the supporter of regional languages as the primary medium for the success of educational Program. India has so far three education policies after independence. The first national education policy in India was unveiled in 1968 and the second one in 1986 during the tenure of Rajiv Gandhi as Prime Minister; The national education policy of 1986 was revised in 1992. The third national education policy was launched more recently in 2020. All NEP’s recommend free and Compulsory Education: The NPE (1968) recommended that 'strenuous efforts' should be made to fulfill the Constitutional mandate of free and compulsory education for all children upto the age of 14 years, and to ensure that every child who is enrolled in school. There were also attempts to improve teacher qualifications and training, promote the use of regional languages in education, and equalize educational opportunities across India. The 1986 policy called for "special emphasis on the removal of disparities and to equalise educational opportunity," especially for Indian women, and underprivileged classes.

 

The 2020 National Education Policy was India's first education policy formulated in the twenty-first century, aiming for an equitable and vibrant knowledge society through access to better education, equity, quality, affordability, and accountability in education. Key aspects of the New education policy of 2020 include a new 5+3+3+4 pedagogical structure, early childhood care and attention, a focus on foundational literacy and numeracy, curriculum flexibility, the removal of hard, rigid and regimented separations between arts and the sciences and vocational and academic streams, personalized learning and individual attention, and the promotion of the mother tongue or local language as a medium of instruction wherever practical and possible. The new NEP also introduces assessment reforms, with board exams testable twice a year and a focus on core competencies. 

 

Criticism of India's National Education Policy 2020 primarily focuses on its ambitious but unclear implementation roadmap, association with Hindutva ideology, allegations of backdoor imposition of Hindi, concerns about increased privatization and commercialization, the potential for exacerbating inequalities due to the digital divide, - as emphasized by Marxists and left-leaning intellectuals (who as always do not provide any recommendations as it would diminish the importance of their ideology, lack of thorough stakeholder consultation, and fears of over-centralization of power and right-wing ideological infiltration into the education system. Critics also allege funding gaps, insufficient infrastructure for new methodologies, incompatibility with latest trends in pedagogy, lack of trained teachers for vocational education, and the potential devaluation of public universities. The DMK of Tamil nadu rejected The NEP of 2020 and promoted its own policy. The Tamil Nadu government’s policy seems to be a copy of NEP more or less, albeit with minor modifications.                                                                                                                                                                                                                                                                                       

 

We have authored a large number of papers on pedagogy. As such, we would request our readers to  read them. We have also called for innovation creativity, less rote learning, scientific method , practical skills, lexical development of Indian languages, logic and reasoning, time and space encapsulation etc  etc. We have called for functionalism in education. We have called for AI in education in the long –term. We have called for automation of education in the long-term. We request readers to go through  all our publications in detail. Tamil Nadu has set a trend. We request other Indian states to follow suit, but act responsibly and in the interests of science and education. This will differentiate states from one another

This will promote competitive rivalry, in the true spirit of competitive federalism.  Getting the central government to initiate changes will take time, as there will be dogma, and political exigencies involved. State governments must take the lead wherever possible. This will goad the central government into action n the long term.