THE industrialisation of the country by catering



The Need: Until its nationalisation in 1955, the State Bank of India,
called Imperial Bank before nationalisation was the only financial institution
which was owned by the government. The idea of nationalisation of privately
owned commercial banks came about since they were not working towards the
collective goal of industrialisation of the country by catering to the social
and developmental goals. Access to credit in rural areas and for small scale
borrowers remained a distant dream even with enactment of Banking Regulations
Act of 1949 and nationalisation of SBI in 1955. Instead, large industries and
established business houses were favoured by all banks. The process of
nationalisation took place in 2 phases one in 1969 with the nationalisation of
14 banks and the next phase in 1980 covering 8 banks. Currently there are 27
nationalised banks. Another reason was the failure of 361 private banks across
the country in the period 1947 to 1955. The depositors in these banks ended up
losing all their money with no guarantee of any sort being provided for them.

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The Objectives: The 5 most important objectives of nationalisation of
banks as outlined in the parliament on July 21 1969 were:

Social welfare: Need of the hour was to channel funds to
people in need.

Control of private monopoly: Many banks were controlled by
established businesses and families. This needed to be controlled.

Expansion of banking services: More branches in rural areas.

Develop banking habits: Develop banking habits among rural

Priority sector lending:
Agriculture was deemed to be the most important sector in the Indian economy.
Hence it was made sure that this sector got more importance when it came to
disbursing credit.




banking system in India has greatly improved and also progressed appreciably
after nationalization of banks in 1969. The major achievements
post-nationalization period are given below:


of the Banking Industry

scheme: All the districts in the country are allotted to State Bank Group, private
Indian banks and nationalized banks. The lead bank is given the role of an
agent of economic development in the state through expansion and
diversification of credit facilities in the district.


Expansion: It
has been found that there has been a very impressive expansion of bank branches
after the nationalization of major banks in 1969.


in Rural Areas: The
main thrust of bank expansion policy in the post nationalization period has
been on increasing the bank facilities in rural areas.


of regional imbalances:
A big impact/highlight of the branch expansion policy since the nationalization
of banks have been to extend the banking facilities in the deficit and unbanked
areas and to reduce the overall regional imbalances.


of bank deposits:
Ever since the nationalization of banks, there has been a clear significant
increase in the deposits on commercial banks.


The expansion and increase of bank credit facilities has also been greater in
the post-bank nationalization time period.


in Government Securities: After nationalization, there has been a
steady increase in the investment for the banks in government and other
securities and bonds which increased from Rs.1727 cr in March 1970 to Rs.1738236
cr in 2011.


of Priority Sectors: Some sectors have been differently classified as priority sectors so as
to increase the impacts on those particular sectors and it has shown clear
development in those sectors.


finance: The
proportion of credit has grown from 5.4% in 1969 to 16.6% in 2011.


Promotion: The
nationalization of commercial banks have given a rise in export promotion.


Finance:  Another priority sector -Housing
finance. The public sector banks have played a crucial role in this particular


credit Credit Card Scheme:
This policy has gained popularity and implementation has been taken up by 27
commercial banks. 334 central cooperative banks, and 187 regional rural banks
up to December 2000. The number of cards increased from 6.1 lakhs by  March 1999 to 878.30 lakhs by November 2009.





of  banks of India in 1969 was a historic
step taken by the then Prime Minister of India , Indira Gandhi so as to control
private monopolies and uplift the sections of society which were in need that
time. Though the benefits of Nationalisation of banks was not much evident
during the introductory period, it was found later that this government policy
has helped India grow economically. This has helped Indian agriculture and
small village industries to develop economically. Also, the allocation of funds
in corporate families and private business houses was controlled through this
reform. Moreover the Nationalisation of banks has helped in expansion of
banking in India during those times when the number of banks that were
available during time were limited compared to the population and needs of the
country. The coming years witnessed expansion and branching of these banks
penetrating the rural and sub-urban India. Further , Nationalisation of banks
were a driving force by which people started using banking services more
effectively as money in the hands of government meant much reliable than the
previous scenario. Several schemes were implemented, one being Lead Bank Scheme
(1969).After Nationalisation there was a huge progress in commercial banks of
India. The economic impacts of Nationalisation of Banks in 1969 still remains a
debated one. The historical implications states that it was not successfully
implemented during that time which lead to disappointment in terms of the
achievement targeted milestones which were set back then.





After the nationalization
phenomenon started in India following changes started. There was no barrier be
it be economic or social between customers and bankers, this lead to a massive
explosion of customer base, also banks focused to improve the services
rendered. Another after effect is the expansion or growth even to the deep
rural areas without the concern for profit, this in a way created many
employment opportunities benefitting the society. There has been a substantial
increase in the number of branches of the bank keeping in mind the rural and
semi urban customers. The benefits of Nationalization are reaped even today in
the form of banking services. Also, all credits go to nationalization of banks
for the fast recovery from 2007 financial crisis.





              Nationalised banks in India
works to provide social welfare to the public. They work to direct the funds to
the underprivileged and various sectors such as agricultural sector and small
industries for their economic development since these are the sectors that
contribute mostly to the national income. Nationalised banks in India helps to
control the private monopolies and also helps in reducing the regional
discrepancies. They work to provide banking facilities to the major rural areas
of the country.

              A major criticism about nationalisation was that some
banks were not nationalised so that the businessmen may not have suffered. The
government contended that the nationalised banks had maximum deposits with them
and the other banks were not in a position to influence the economy of the
country. But there was a need to have complete control over the banks in order
to expand the economy.

              After the independence, when the people of India were
deprived of banking facilities especially in the under developed regions of the
country, it was the nationalised banks that worked to escalate the banking
facilities across the country.

              The results of nationalisation of banks in India can be
summarized as follows:

Ø  After nationalisation, the
banking industry in India has made major progress and provides banking
facilities to every part of the country.

Ø  The public sector banks
has played a major role in organizing, saving and extending credits mostly in
favour of the weaker sections of the society.

Ø  It has aroused the need
for using banking services among the rural and remote areas of the country.

Ø  It has helped in the quick
transfer of funds from one place to another.

Ø  It has provided employment
opportunities for the educated youth of the country.

Ø  It has made credit
available to the people such as agricultural labours and small traders at low
interest rate.

Ø  It has helped to free the
rural poor from the hands of the lenders.

Ø  It ensured the supply of
credit to many industrial activities.

Ø  It has ensured the use of
funds for appropriate and desirable purposes in the society.

Ø  It has helped to remove
regional difference in the economic development.

Ø  It has helped in the
implementation of various welfare measures by the government.