Nationalisation of Banks
Indian banking system passed through a series of crises and hence its growth
was very slow during the first half of the 20th century. But after
Independence, the Indian banking system recorded rapid progress. This was due
to planned economic growth, increase in money supply, growth of banking habit,
setting up of the State Bank of India and its associate banks in the 1950s, the
control and guidance by the Reserve Bank of India and above all nationalization
of the 14 commercial banks in July 1969, and 6 more banks in 1980 by the
to nationalization, it was believed by some economists that Indian commercial
banking system did not play its role in the planned development of the nation.
The banking system was controlled by the leading industrialists and business
magnates. They used public funds to build up private industrial empires. Small
industrial and business units were consistently ignored. Agricultural credit
was never seriously considered. Therefore Government of India took over 14
commercial banks in July 1969 and 6 other banks in April 1980.
commercial banking sector in India has within its fold the following
The State Bank of India
The seven associated banks of State Bank of India.
Twenty nationalized Banks.
joint stock commercial banks
Foreign banks functioning in India
Regional Rural Banks.
Performance of Nationalized Banks
most important benefit of nationalization of commercial banks was the
achievement of homogeneity and strength as well as cohesion in the banking
structure of India, affording a better environment for effectively implementing
banking and monetary policies of the government.
working of the commercial banks after nationalization show that they have made
a complete departure from the old conservative banking practices and moving
towards the objectives set forth in various fields of their operations. They
have made significant achievements in the sphere of 'branch expansion', deposit
mobilization, production-oriented financing, extension of credit to neglected
sectors and creating new vistas in banking.