Nationalisation Of

Banks
IL & FS Crisis
 Introduction
• India after independence started economic planning with social objective
• 1st 5year plan was made in 1951
• There were 430 commercial banks at that time, but they failed to help the
objective Banks were controlled by Business houses, failed to cater need to
cottage industry, poor people etc
• The Reserve Bank was also not completely state owned until it was
nationalized in terms of the Reserve Bank of India (transfer of Public
Ownership) Act, 1948
 What is Nationalaization

Nationalization is the process of the

government seizing ownership or partial
ownership in an organization, although the
situation is temporary in many cases. It is
a term that gets applied to situations in
which the government or state controls a
business or entity in the private sector.
List the banks which are nationalized for
14 years
Banks which were nationalised in July 1969:
Allahabad Bank, Bank of Baroda, Bank of India, Bank of
Maharashtra, Central Bank of India, Canara Bank, Dena Bank,
Indian Bank, Indian Overseas Bank, Punjab National Bank,
Syndicate Bank, UCO Bank, Union Bank and United Bank of
India.
Bank which were nationalised in April 1980:
Andhra Bank, Panjab & Sind Bank, New Bank of India, Vijaya
Bank, Corporation Bank, Oriental Bank of Commerce
 Objective Of Nationalization
• To eliminate concentration of economic power in few hands
• To diverse the flow of bank credit towards priority sector consisting of agriculture
and allied activities, small scale industries and small businesses.
• To foster a new class of entrepreneur so as to create, sustain and accelerate economic
growth.
• To professionalize bank managements.
• To impart adequate training as also reasonable terms of service to bank staff
• To extend banking facilities to unbanked rural areas.
 Short term Gain Long term Loss

• The number Of branches in rural India • No measurable increase in

expanded as banks ordered to open four
agricultural investment.
branches in India’s villages for every one
in its towns and cities. This led to doubling • Effect on industry was clearly
of showing rate negative. Banks once
• Agricultural lending increased, as banks nationalizied, risk averse, rarely
were told that 18% of credit should go to
lending to new firms.
firming and allied activities.