Banking in India is not a new term, we can find its roots in the Ancient past of India where common banking work can be seen such as money lending and some instruments such as bills of exchange used by the kings and Merchants for trade and commerce activities. The Modern banking in India is little over a century old. Early 19th century most of the banks were incorporated as Joint stock entities, either promoted by large Corporates or the royal families. Despite the provisions, control and regulations of the Reserve Bank of India, banks in India except the State Bank of India (SBI), remain owned and operated by private persons. By Independence 90% of the banks were privately owned.
Banking sector was doing well after the independence. Its spread was mainly concentrated in the urban areas. Its services were available to handful of rich and upper middle class people only. The progress regarding the social objectives was not adequate. Banks used to serve their masters for profits. It was felt that banking had to spread for rapid economic growth and social justice to all the people of the society giving access to rich and poor and to extend the reach of the Government programmes across the length and breadth of the country.
There was no alternative to nationalization of at least the major segment of banking system. Indira Gandhi, the then Prime Minister of India, expressed the intention of the Government of India in the annual conference of the All India Congress Meeting in a paper entitled Stray thoughts on Bank Nationalization.
Thereafter, the Government of India issued the 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. Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received presidential approval on 9 August 1969.
The following banks were nationalized in 1969:
- 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
We have also witnessed a 2nd round of nationalization of 6 more banks followed in 1980. The name of those banks are Punjab and Sind bank, vijaya Bank, Oriental Bank of India, Corporate bank, Andhra Bank, New bank of India (merge with PNB in 1993).
It was believed that nationalization would mark a new phase in the Indian economy and would help Government to smoothly and efficiently run its objectives. Thanks to nationalization of banks, Government is succeeded partially in meetings its objectives. Still many people in India don’t have banking access. But to compete with Private sector banks Public sector banks (PSBs) are bringing state of the art technologies to widen its reach and provide more secure and safe banking services to the people. Banking sector is the backbone of the Indian economy and to strengthen an economy banking sector needs to be strengthen. The Modi Government is infusing capital to strengthen the public banking system with reduction on ownership and focusing more on Governance. Hopefully we’ll see some Ache din (Good days) in the banking sector in the future.
Thank You.
3 Laws of Economics 