Banks Nationalisation

History of Banks Nationalisation in India

Banking Awareness

Banking Awareness

In this article we will explain how Banks Nationalisation took Place.

  • The significance of banking in our day to day life is being felt increasingly.Banking sector is life line of economy. How did this concept emerge? and Banks Nationalisation
  • In this article we’ll, explore how the birth of this flourishing industry took place.

History of Indian Banking System

Globally, the story of banking has much in common, as it evolved with the money lenders accepting the deposits and issuing receipts in their place. Banking was fairly varied and catered to the credit needs of the trade, commerce, agriculture as well as Individuals in the economy.

The pre-independence period was largely characterized by the existence of private banks organised as joint stock companies.

Early Phase of Indian Banks, from 1786 to 1969

  • The first bank in India, the General Bank of India,was set-up in 1786.
  • In 1790 Bank of Hindustan was set up.

But now both are not in existence

Later on East India company established three banks those are Bank of Bengal(1809),Bank of Bombay(1840) and Bank of Madras (1843). Combining these three banks we called Presidency Banks

Other banks during this period were

S.No       Year                  Bank Name
1 1865  Allahabad Bank (By Indians)
2 1894 Punjab National Bank
3 Between 1906 and 1913 Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank and Bank of Mysore
  • In 1921, presidency banks were amalgamated to form the Imperial Bank of India, was run by European shareholders.
  • The Reserve Bank of India (RBI) was established on 1st April 1935, under RBI Act 1934.
  • After independence, the Government of India came up with the Banking Companies Act, 1949 later changed to Banking Regulation Act 1949 as per amending Act of 1965.
  • RBI was vested with extensive powers for the supervision of banking in India as a Central Banking Authority.
  • In 1955 on 1st July, Imperial Bank of India was nationalized and given the name “State Bank of India” (SBI), to act as a principal agent of RBI and it was established under State Bank of India Act, 1955.
  • Seven subsidiary of SBI was nationalized in 1959.

SBI Seven Subsidiaries and Merging

  • State bank of patiala,State bank of Hyderabad,state bank of Travancore,state bank of Mysore,state bank of Bikaner and Jaipur,state bank of Indore and state bank of saurashtra

State Bank of Saurashtra in 2008 and State Bank of Indore in 2010, merged with SBI.

Remaining 5 SBI Associates and Bhartiya Mahila Bank were merged with SBI in 2017

Banks Nationalisation

The Nationalization of Commercial banks took place with an aim to achieve social welfare,controlling private monopolies, Expansion of Banking, Reducing Regional Imbalance, Priority Sector lending and developing banking habits. The main aim of Banks Nationalisation was to reach clients in rural areas and provide them with more quality services.In order to have more control over banks

On 19th July,1969 Mrs Indira Gandhi the then Prime Minister nationalized 14 major commercial banks whose reserves were more than Rs.50 crore

Nationalisation of Banks (1969)

  • Central Bank of India
  • Bank of Maharashtra
  • Dena Bank
  • Punjab National Bank
  • Syndicate Bank
  • Bank of India
  • Indian Bank
  • Indian Overseas Bank
  • Bank of Baroda
  • Union Bank
  • Allahabad Bank
  • United Bank of India
  • United Commercial Bank
  • Canara Bank

on 15th April, 1980 the banks with more than Rs.200 Crore of reserves got Nationalized under Indira Gandhi Prime ministership

Nationalisation of Banks (1980)

  • Andhra Bank
  • Corporation Bank
  • New Bank of India (In 1993 merged with Punjab National Bank)
  • Oriental Bank of Commerce
  • Punjab and Sind Bank
  • Vijaya Bank

other important points,

  • On the suggestions of Narasimhan Committee, the Banking Regulation Act was amended in 1993 and thus the gates for new private banks were opened.
  • In 1971 Credit Guarantee Corporation was formed
  • In 1975 Regional Rural Banks (RRBs) were formed.
  • By the end of 1974, three separate institutional arrangements Commercial Banks, Cooperative Banks, RRBs were emerged.
  • Establishment of National Bank for Agriculture and Rural Development (NABARD) in 1982 for cooperative credit under B.Sivaraman Committee .
  • Apart from NABARD,
 S.No  Bank Name  Purpose
  1  EXIM Agricultural Sector
  2 SIDBI Credit needs of small industries
  3 NHB Housing Board
  • In 1988 Securities and Exchange Board of India was established to cater the security market in India.
  • Since 1991, the Indian financial system has undergone radical transformation leads to the development of Non Banking Finance Companies (NBFCs) and Development Financial Institutions (DIFs).

Happy Reading !!

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