Bank nationalisation into 50th year

Palakkad: Bank nationalisation, an act much hailed for a big revolution in the economy of the country, turns 50 years. It was on 19th July 1969, Indira Gandhi, the then prime minister, who also held the portfolio of finance minister, issued the ordinance which nationalised 14 private commercial banks.

Allahabad bank, Bank of Baroda, Bank of India, Bank of Maharashtra, Canara Bank, Central Bank of India, Dena Bank, Indian Bank, Punjab and Sindh Bank, Syndicate Bank, UCO Bank, Punjab National Bank, United Bank of India were nationalised. Thereto 70 percentage of investment of the country were controlled by these banks.

SBI was the only bank in the public sector prior to the nationalisation. The demand to nationalise banks got currency after the banks hesitated to render loans to the agricultural sector and 361 banks went bankrupt, during 1947-1955, which undermined the security of bank deposits.

The farmers got only 2.3 percent of the loans supplied by the private banks. In 1980, the government took over six more banks. Banking services became accessible for the common people after nationalisation of the banks. More branches were opened in rural regions. The common people were offered agricultural, small scale industrial and self employment entrepreneurial loans. The government later took over other 36 banks which went bankrupt after bank nationalisation too.

Political outcomes

Internal rift inside the Congress party became intense as Indira Gandhi assumed office as prime minister after the death of Lal Bahadur Sastri. A 'syndicate' was in operation under the leadership of Morarji Desai and Neelam Sanjeeva Reddy against Indira. The duo was against bank nationalisation.

After removing Morarji from the post of finance minister, Indira Gandhi took over the portfolio and implemented bank nationalisation. As Morarji was ousted from the post, the Congress split.

Again to privatisation

Strength of public sector banks did save the country's economy even during the economic crisis of 2008. However, when it comes to 2017, 10 percent of the assets of the public sector banks is bad debts. Most banks are on the verge of bankruptcy, caused due to uncontrolled loans extended to corporates. Even the government attitude is to welcome private banks.

Citing efficiency, the corporate sector is now demanding privatisation of public sector banks. Niti Ayog also support that demand.

Thus when the landmark bank nationalization is preparing to turn 50, and with a banking history mixed with glorious and dubious distinctions, much of the sector is at stake.