Nationalisation does not mean that existing industrial enterprises will be

deprived of their credit needs for genuine productive purposes. - Indira Gandhi

Nationalisation of bank was momentous move initiated by the government for

the advancement of the country. According to IMF, Nationalisation means the
taking of control by the government over assets and over a cooperation,
basically by acquiring the whole stake in the corporation. In 1949 the RBI,
Indias Central Bank became the first bank to be nationalised, RBI soon become
the regulatory authority for banking in India. Most Indian banks at that time were
privately owned. Thus the Indian government then recognized the need to bring
them under some form of government control to be able to finance Indias
growing financial needs. Recently, as per the present Chief Economic Advisor
Arvind Subramanian bank nationalisation was a gigantic historical mistake, it was
the biggest economic blooper ever made by Indira Gandhi.

FIRST PHASE OF 14 BANKS In July 1969, all Indian congress committee session
held at Banglore. The note on economic policy referred to the great feeling in
the country regarding nationalisation of private commercial banks. The A.I.C.C.
resolution endorsing the Prime Ministers note strengthened her conviction and
paved the way for the implementation for the her revised thoughts. It was,
therefore within six months of the imposition of social control on banks,
ordinance to nationalise the fourteen major banks having deposits of Rs. 50
crores or more was issued on 19th july,1969 to serve the better needs of
development of the economy in conformity with national priorities and
objectives. These banks were mostly owned by businessmen and even managed
by them were :- The Central Bank of India ltd. The Bank of Maharsthra Ltd. The
Dena Bank Ltd. The Punjab National Bank Ltd. The Syndicate Bank Ltd. The
Canara Bank Ltd The Indian Bank Ltd. The Indiana overseas bank Ltd. The Bank
of Baraoda Ltd. The Union Bank Ltd The Allahabad bank Ltd. The United Bank of
India Ltd. The UCO bank ltd.( united commercial bank) The Bank of India ltd.
Before the step of nationalisation of Indian banks, only state bank of india(SBI)
was nationalised. It took place in July, 1955 under the SBI Act of 1955.
Nationalisation of seven state banks of India(formed subsidiary) took place on
19th july, 1959 The State Bank of India is Indias largest commercial bank and is
ranked one of the top five banks worldwide. It serves 90millions customers
through a network of 9,000 branches and its offers

Either directly or through subsidiaries.

A wide range of banking services.

SECOND PHASE OF SIX BANKS On 15th April, 1980 six more banks having
deposits of over 200 crores, were nationalised. Till this year approximately 80%
of the banking segment in India were under government ownership but after this
there was a rise of approximately 80% in deposits and advances took a jump by
11,000% These banks were
1. The Andhra Pradesh Bank Ltd. 2. The Corporation Bank Ltd. 3. The New
Bank of India Ltd. 4. The Oriental Bank of Commerce Ltd. 5. The Punjab
and Sindh Bank Ltd. 6. The Vijaya Bank Ltd.

Later, the new bank of India was merged in Punjab National Bank which had
already nationalised on 19th July, 1969. Historical blooper 1) Through
Nationalisation, public control leaves the doors of banks open for corruption
and favourism. Their performances are not always commendable. Their losses
are heavy. The common man experienced that public sector undertakings do
not respect an individual and delays and lethargy in work and services are a
bane of such undertakings. 2) Nationalisation is not the remedy for curbing
the growth of monopoly and the concentration of wealth and power as the
root cause for them lies in the existing economic system. 3) Extending loans
to agriculture and small scale industries is risky and less remunerative. Such
loans are against the sound banking system and may weaken t he economic
viability of these institutions. 4) The experience of other nationalised
institutions indicate that the nationalisation of the commercial banks will
reduce the efficiency of these banks as political interference will impair the
smooth working of these institutions. 5) The rapid expansion of branches,
establishment costs have risen as the structure of salaries and wages do not
make any real distinction between urban and rural branches. The rapid
growth in the numbers of staff and accelerated promotions have also diluted
the quality of manpower. There has consequently been a perceptible decline
in the quality of supervisory and managerial staff in banks. 6) Growing
diversification of functions, especially in regard to extending the coverage of
bank credit to agriculture and small industry where the unit cost of
administering the loan tend to be high. The rapid expansion of banking into
the rural and semi-urban areas has often been cites as a major factor
affecting the earning capacity of the banks. 7) By virtue of the control
exercised by the RBI since nationalisation and government authorities, the
executives and other officials of the banks are afraid to take decisions which
have naturally affected adversely and slowed down the services to the
customers. 8) Banks were not at all responsible for the evasion of taxes or for
genesis of black money. It was the fruit of an irrational tax structure, high
deficit financing and a corrupt public administration in the country. It was
totally wrong to say that bank nationalisation would in any way help in
checking tax evasion or in curbing the evil of black money. 9) Under public
sector banking, inter-state rivalries and policies would raise their ugly hands ,
damaging the present sound banking system under the private sector. 10)
There is no need to take such a drastic step of bank nationalisation to curb
malpractices of privately owned banks as they can be probed by embracing
appropriate monetary and fiscal policies and through efficient supervision by
the Reserve Bank Of India.

COMMITMENT OF THE HOUR 1) The Nationalisation would give an impetus to

banks lending to priority sectors such as agriculture, small scale industries,
transport operators, retail trade, small business, professional and self-
employment persons and education, which under the influence of tradition
and vested interests were denied adequate access to the banking system. In
short, Nationalisation of banks would enable the banking sector to diversify
its resources for the benefit of the priority sector and as required under the
schemes of planned economic development of the country. 2) Nationalisation
of banks would check favourable attitude of the banks towards directors by
providing credit at concessional rates for the promotion of the interest of the
directors. 3) Nationalisation would bring down the excessive emoluments of
the top executives of some private banks, who were receiving unduly high
salaries. Furthermore, wide disparities in the salaries in different commercial
banks would be removed when banks were under state control . 4) State
ownership of the banking system could be regarded as an essential condition
for successful planning and all-round progress of the national economy,
community development and for the welfare of the people. 5) Distribution of
credit by the Nationalised banks would be much more efficient as it would
flow into productive and socially desirable channels, and its credit would be
relatively less costly. 6) Nationalisation of bank is necessary for the
furtherance of socialism and in the interest of the community 7) If all
commercial banks are nationalised, the Reserve Bank Of India would be in a
position to implement its monetary policy more effectively. 8) Nationalisation
would bring a rapid increase in the number of banking offices in rural and
semi-urban areas and helped considerably in deposit mobilisation to a greater
extent. 9) Nationalisation eliminates the wasteful competition and raises the
efficiency of the working of the banks. 10) Nationalisation of bank would
replace the profit motive by service motive in the functioning of the banks,
thereby helping greatly in the achievement of the goal of socialism. 11)
Nationalisation of bank would check the incidence of tax evasion of black
money. 12) As france , Italy, the UAR, Indonesia, Burma, Libya, the USSR, the
GDR etc., have benefited by Nationalisation of their banks, India should also
get profit by nationalising her banking industry

CONCLUSION Nationalisation has helped country mitigate the ill- effects of the
global financial crisis. This, however, could at finest be an unplanned outcome
as nationalisation was primarily aimed at reconfiguring the financial sector to
meet an industrialising Indias plan concerned, and to correct dragging
unfairness in credit distribution. Nationalisation of banks was a dynamism for
socialization higher than economic growth of the country. It has gained the
nonpartisan of its creation. The primeval of Nationalisation mechanism did
have loopholes from where corruption and malpractices entered but the
Economic Reforms of 1991 brimming the loopholes for the fitter.
Nationalisation diffused public confidence in the banking system embolding
the mobs to save and invest. It eliminated the regional biasness and
promoted opening up branches in the lonesome areas of the country as well,
hence enhancing the banking network. Aside elimination of monopoly,
competition, nationalisation rationalised banking practices in the country. The
Pradhan Mantri Jan-Dhan-yojana would not have been viable with private
banking sector. Forthwith, we can insolently say that the objective behind
nationalisation of banks was a commitment of the hour. Indian Banking
 Industry is way beforehand, all set with a cutthroat spirit, having a staff with
decisive functioning and aimed towards more yielding. Banking has become
more professional and ethical and nationalisation hints to have unfolded to a
stage from where we can look forward.

A bank is a financial institution that provides banking and other financial services
to their customers. A bank is generally understood as an institution which
provides fundamental banking services such as accepting deposits, providing
loans and meeting requirements of the various sectors for the development of
the economy such as Agricultural, Industrial, IT etc. At the time of first phase the
growth of banking sector was very slow. Between 1913 and 1948 there were
approximately 1100 small banks in India. To streamline the functioning and
activities of commercial banks, the Government of India came up with the
Banking Companies Act, 1949 which was later changed to Banking Regulation
Act 1949 as per amending Act of 1965 (Act No.23 of 1965). Reserve Bank of India
was vested with extensive powers for the supervision of banking in India as a
Central Banking Authority. After independence, Government has taken most
important steps in regard of Indian Banking Sector reforms. In 1955, the Imperial
Bank of India was nationalized and was given the name "State Bank of India", to
act as the principal agent of RBI and to handle banking transactions all over the
country.It was established under State Bank of India Act, 1955. Seven banks
forming subsidiary of State Bank of India was nationalized in 1960. On 19th July,
1969, major process of nationalization was carried out. At the same time 14
major Indian commercial banks of the country were nationalized. In 1980,
another six banks were nationalized, and thus raising the number of nationalized
banks to 20. Seven more banks were 2 nationalized with deposits over 200
Crores. Till the year 1980 approximately 80% of the banking segment in India
was under governments ownership. On the suggestions of Narsimhan
Committee, the Banking Regulation Act was amended in 1993 and thus the gates
for the new private sector banks were opened. The following are the major steps
taken by the Government of India to Regulate Banking institutions in the
country:- 1949: Enactment of Banking Regulation Act. 1955: Nationalisation of
State Bank of India. 1959: Nationalization of SBI subsidiaries. 1961: Insurance
cover extended to deposits. 1969: Nationalisation of 14 major Banks. 1971:
Creation of credit guarantee corporation. 1975: Creation of regional rural banks.
1980: Nationalisation of seven banks with deposits over 200 Crores.
Nationalisation: By the 1960s, the Indian banking industry has become an
important tool to facilitate the development of the Indian economy. At the same
time, it has emerged as a large employer, and a debate has ensured about the
possibility to nationalise the banking industry. Indira Gandhi, the-then Prime
Minister of India expressed the intention of the Government of India (GOI) in the
annual conference of the All India Congress Meeting in a paper entitled "Stray
thoughts on Bank Nationalisation". The paper was received with positive
enthusiasm. Thereafter, her move was swift and sudden, and the GOI issued an
ordinance and nationalised the 14 largest commercial banks with effect from the
midnight of July 19, 1969. A second step of nationalisation of 6 more commercial
banks followed in 1980. The stated reason for the nationalisation was to give the
government more control of credit delivery. With the second step of
nationalisation, the GOI controlled around 91% of the banking business in India.
Later on, in the year 1993, the government merged New Bank of India with
Punjab National Bank. It was the only merger between nationalised banks and
resulted in the reduction of the number of nationalised banks from 20 to 19. 3
Liberalisation: In the early 1990s, the then Narsimha Rao government embarked
on a policy of liberalisation, licensing a small number of private banks. These
came to be known as New Generation tech-savvy banks, and included Global
Trust Bank (the first of such new generation banks to be set up), which later
amalgamated with Oriental Bank of Commerce, Axis Bank(earlier as UTI Bank),
ICICI Bank and HDFC Bank. This move along with the rapid growth in the
economy of India revolutionized the banking sector in India which has seen rapid
growth with strong contribution from all the three sectors of banks, namely,
government banks, private banks and foreign banks. The next stage for the
Indian banking has been setup with the proposed relaxation in the norms for
Foreign Direct Investment. The new wave ushered in a modern outlook and tech-
savvy methods of working for the traditional banks. All this led to the retail boom
in India. People not just demanded more from their banks but also received
more. Currently (2013), banking in India is generally fairly mature in terms of
supply, product range and reach-even though reach in rural India still remains a
challenge for the private sector and foreign banks