Nationalization is a process whereby the national government takes over the private assets into public ownership by an Act or an ordinance.
14 commercial banks were nationalized by the Government of India on July 19, 1969, through an ordinance under Article 123 of the Indian constitution which was replaced by the Banking Companies Act (Acquisition and transfer of undertakings). Later, in April 1980, six more banks were nationalized. However, Bank of India merged with PNB in 1993 and hence, in total 19 banks have been nationalized so far.
The 19 nationalized banks are.
- Allahabad Bank
- Andhra Bank
- Bank of Baroda
- Bank of India
- Bank of Maharashtra
- Canara Bank
- Central Bank of India
- Corporation Bank
- Dena Bank
- Indian Bank
- Indian Overseas Bank
- Oriental Bank of Commerce
- Punjab & Sind Bank
- Punjab National Bank
- Syndicate Bank
- UCO Bank
- Union Bank of India
- United Bank of India
- Vijaya Bank
The nationalization took place in the regime of PM Indira Gandhi who was under the pressure to opt for nationalization. However, the then Finance Minister Morarji Desai was not in favor of nationalization. His words were, “Recent experience does not suggest that large banks need to be taken over so as to do something they have not been doing.”
STATE BANK OF INDIA
There were 3 presidency banks in the country i.e Bank of Bengal, Bank of Madras, Bank of Bombay and they were amalgamated in 1921 to form the Imperial Bank of India. It was a private entity and in 1955, it got nationalized and was named as the State Bank of India.
Seven subsidiaries of the State Bank of India were nationalized in 1959 through the State Bank of India (Subsidiary Banks) Act, 1959.
- SOCIAL WELFARE: It was a need of the hour to divert the funds to areas such as agriculture, small scale industries so that they could expand.
- CONTROL ON PRIVATE MONOPOLIES: Prior to nationalization, the banks were controlled by private entities which did not take interest in providing credit in the distressed areas.
- EXPANSION OF BANKING SECTORS: It was necessary to expand the banking in the rural areas so that every individual inculcated banking habits and it would have also reduced the regional imbalance caused due to the accumulation of banks only in the urban sector.
- PRIORITY SECTOR LENDING: Agriculture is the main source of income in India. However, credit was not routed towards this sector. Hence, nationalization was required to meet the demands of this sector.
EFFECT OF NATIONALISATION
- The Indian Economy saw the impact of nationalization very quickly. There were no barriers between the bankers and the customers. There was a massive expansion in the customer base.
- The employment opportunities increased with the setting up of more branches.
- The social welfare took a stride as the banks no longer focused on making the profits alone.
- The priority sectors which involved uncertainty of returns could avail credit facilities as funds were mobilized to these sectors for the strengthening of the Indian Economy.
Nationalization of banks was an important measure that was undertaken to make the credit facility available to all the sectors of the Indian society so as to boost the economy.