Nationalisation of banks in India

Nationalisation of banks in India: Brief History & Full list of Banks

Nationalisation of banks in India


Basic History of Nationalisation of banks in India

The story of Nationalisation of Banks in India was started from 1955 when the Imperial Bank of India was nationalized and reestablished as the State Bank of India under the SBI act 1955. Till 1969 State Bank of India was the only bank that was not privately owned. But the most important step was taken when Indira Gandhi’s Government passed an ordinance and nationalized the major 14 commercial banks and transferred the ownership of these banks form the private sector to the public sector.


After independence, the government of India made 5-year planning system to achieve social objectives but commercial banks failed to support the government in achieving social objectives because all commercial banks were owned by private corporate houses those days. That was the basic reason for Nationalisation of Banks in India. On 19th July 1969, the government of India nationalized 14 commercial banks which had more than Rs 50 crores total deposit base. The second tenure of nationalization of banks in India came in April 1980.


Nationalisation of banks in India


image source: The Times Of India


Objectives of Nationalisation of banks in India


  1.  For proper utilize the savings of the country’s people to the maximum possible extent.

2. For expand the banking system in the country, basically for social purposes.

3.  For fulfill financial credit needs of small industry and other economic activities and to support them for their growth.

4.  For reducing the economic gap between rural and urban areas in the country because before nationalisation banking sector was limited to urban areas.

5.  To control the power of private sector or monopoly firms, because on that time most banks were occupied by  private cooperate houses and they did not show interest in social welfare.

6.  The government needs investment in social infrastructure for developing the economy of the country like roads, bridges, schools, port, hospital etc because the British left India in the worst condition.


 Banks that was Nationalised in 1969


Serial no       Bank Name                        Founded on       Head Offices


  1.          Allahabad bank                          1865                     Calcutta
  2.          Bank of Baroda                           1908                     Mumbai
  3.          Bank of India                              1906                     Mumbai
  4.          Bank of Maharashtra                  1935                     Pune
  5.          Canara Bank                               1906                     Bangalore
  6.          Central Bank of India                 1911                     Mumbai
  7.          Dena Bank                                 1938                     Mumbai
  8.          Indian bank                               1907                     Chennai
  9.          Indian overseas bank                1937                     Chennai
  10.          Punjab & Sindh Bank                1908                     New Delhi
  11.          Punjab National Bank               1894                     New Delhi
  12.          Syndicate Bank                         1925                     Karnataka
  13.          UCO bank                                 1943                     Calcutta
  14.          United Bank of India                 1950                    Calcutta


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Nationalisation of banks in India

Banks that was Nationalised in 1980

Serial No    Bank Name       Head Office                          Founded on                                                

  1.      Vijaya Bank                Bangalore                                   1931
  2.     Oriental Bank of Commerce     New Delhi                          1943
  3.     Corporation Bank                Mangalore                           1906
  4.      Andhra Bank                      Hyderabad                          1923
  5.         Union Bank of India              Mumbai                          1919



Merits of Nationalisation of Banks in India


1. Bank deposits expanded:  

After the Nationalisation of banks, Banks deposits was increased by 200 times because expanding of bank’s branches. Before nationalization banks only focus on developed and populated areas but after the nationalization banks also opens their branches in the undeveloped and low populated area, consequently, banks deposits boosted and reached a record level.


2.  Credit provided to weaker section:

After Nationalisation of banks, Banks are providing loans to the weaker section of society at a very low rate. In April 1972, Government released a scheme “Differential Interest rates scheme” in which banks have to give loan at 4% interest rate to the weaker section of society.


3.  Risk Reduction: 

After nationalization, Due to a large number of banks deposits and borrowers, banks had brought a high degree of diversification in the banking system, which reduces the risk of defaults.

4.  Focus on small Industries:

Before nationalization banks only focus on developed and highly profitable sectors but after nationalization banks also focus on a small industry which is not highly profitable but still provide welfare to society.


Nationalisation of banks in India


Demerits of Nationalisation of Banks of India


1.  Less Competition: 

After the nationalization of banks, competitions between banks in India was decreased because now ownership transferred to the government and banks had no incentive to do anything new and innovative to compete with others.


1.  Inefficiency:  Due to less competition between banks and less innovative ideas, the country’s banking system becomes inefficient.


2. Political Purpose:  Critics argue that nationalization of banks was a political step instead of social purpose.


3. Increased Expenditure:  After nationalization, branches expanded to the low populated also and undeveloped areas of the country which incur higher expenditure burden.

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