On July 19, 1969 Bank Nationalised Day Came into existence, where 14 banks are nationalised by the government of india. Most of the nationalised banks in india are also refered to ‘public sector banks’. According to the IMF (International Monetary Fund), Nationalisation is a process by which the government takes over private assets and brings them under public ownership
Also See: Types of Banking
Nationalisation of banks means to take the banks under government undertaking. Banks after nationalisation comes directly under Banking regulation Act 1949. RBI (Reserve bank of India), India’s Central bank become the first nationalised banks in india after the indian independence. RBI later become the regulatory authority for banking in India. At that time most of the banks are private control, but later it pulled few of the banks under its control to finance India’s growing financial needs. At Present there are exactly 19 nationalised banks in india as per the RBI official website.
Also See: Memory Recalled Ques Legal Aspects of Banking
Background of Nationalisation:
After the independence, the government of india have adopted planned economic development of the country. In 1951, five years plan came into existence and at that time during the period of 1950-51 there were almost 400+ commercial banks who worked under the privare sectors. All these private banks work for their own agenda and not helped the government in acheiving its goals and ojectives. In July 1955 only, SBI (State Bank of India) became the first nationalised bank in india under the SBI Act of 1955. Also seven subsidiaries bank of State Bank became Nationalized on 19th July 1960.
PMLA – Prevention of Money Laundering Act 2002 and Amendment
Nationalised Banks in India – Steps Taken by Indira Gandhi: On July 1969, the indian government decided to nationalize 14 major commercial banks those have minimum Rs.50 crores of deposit. This was initiated by former prime minister of india, Indira Gandhi. In April 1980, the second phase of nationalization came into effect and 6 more banks were nationalized. After the second phase of nationalization, the Government of India controlled around 91% of the banking business of India. The nationalization of Bank provided the government of India more control of credit delivery.
Objectives of Nationalized Banks in India: Some of the main objectives of nationalization banks in india were:
Social Welfare : Most of the small, village industries and agricultural sectors need funds for their development and expansion and further economic development
Controlling Private Monopolies : Prior to nationalization, majority of banks were controlled by private sector and corporate families. It was necessary for the government to check these monopolies in order to ensure a smooth supply of credit to socially desirable sections.
Expansion of Banking : It was necessary to expand banking across the country. The nationalization of banks was a key for expanding banking network in the un-banked areas.
Reducing Regional Imbalance : It was a absolute necessity to introduce banks in the rural areas where the banking facilities were not available. Nationalization of bank was necessary in order to reduce this regional imbalance.
Developing Banking Habits : In India maximum population live in rural areas. For the progress of the county and economic development, it is necessary to develop the banking habit among such a large population. Nationalization of banks was needed to achieve the goal.
Priority Sector Lending : Agriculture sector and its associated activities were the largest contributor to the national income and were marked as the priority sectors.
But unfortunately the agriculture sector was deprived of their due share in the credit. Nationalization was must for making the funds available to that sector.
