Nationalization of Banks in India : On July 19, 1969, 14 banks were nationalized by the Indian government. Commercial banks belonged to the private sector those times. Since these commercial banks were run by business houses, they failed in helping the government in many ways. Hence, the government decided to nationalize 14 major commercial banks. The Government of India issued an ordinance (‘Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, 1969 and nationalized the 14 largest commercial banks with effect from the midnight of 19 July 1969. These banks contained 85 percent of bank deposits in the country.
Jayaprakash Narayan, a national leader of India, described the step as a “masterstroke of political sagacity”.
Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received the presidential approval on 9 August 1969.
A second dose of nationalization of 6 more commercial banks followed in 1980. The stated reason for the nationalization was to give the government more control of credit delivery. With the second dose of nationalization, the Government of India controlled around 91% of the banking business of India.
Later on, in the year 1993, the government merged New Bank of India with Punjab National Bank.
Nationalization of Banks in India in 1969
On 19th July, 1969 14 banks having reserves more than Rs.50 crore reserves were nationalized. These banks were-
- Allahabad Bank
- Bank of Baroda
- Bank of India
- Bank of Maharashtra
- Central Bank of India
- Canara Bank
- Dena Bank
- Indian Bank
- Indian Overseas Bank
- Punjab National Bank
- Syndicate Bank
- UCO Bank
- Union Bank
- United Bank of India
Nationalization of Banks in India in 1980
On 15th April, 1980 6 banks having more than Rs.200 crore reserves were nationalized. These banks were-
- Andhra Bank
- Corporation Bank
- New Bank of India
- Oriental Bank of Commerce
- Punjab and Sindh Bank
- Vijaya Bank
Why was Nationalization of Indian Banks important?
Nationalization of Banks was important for –
- Social welfare– sectors such as agriculture, small and village industries were in need of funds for their expansion and further economic development.
- Controlling private monopolies– It was necessary to check the private monopolies in order to ensure a smooth supply of credit to socially desirable sections.
- Expansion of banking- It was necessary to spread banking across the country. It could be done through expanding the banking network (by opening new branches) in the un-banked areas.
- Reducing regional imbalance- with an urban- rural divide , it was necessary for banks to go in the rural areas where banking facilities were not available.
- Priority Sector Lending- Nationalization was urgently needed for catering funds to the agriculture sector and its allied activities.
- Developing banking activities- In India, more than 70% of the population used to stay in rural areas. It was necessary to develop a banking habit among such a large population.