Banking Nationalisation — Study Notes
Overview
Banking nationalisation is a landmark reform in India's economic history, marking the government's decisive entry into the banking sector to ensure social control and directed credit. In 1969, Prime Minister Indira Gandhi's government nationalised 14 major private banks, followed by another 6 banks in 1980. This topic is critical for UPSSSC PET as it tests understanding of India's mixed economy evolution, the role of public sector banks (PSBs), and the establishment of Regional Rural Banks (RRBs) to extend banking to rural and weaker sections. Students must know the rationale, immediate impacts, and the structural changes that followed, including the creation of RRBs as a complementary step to reach India's unbanked masses.
The Banking Nationalisation reflects the government's commitment to planned economic development, preventing concentration of economic power, and promoting inclusive growth. Questions can come from the background of nationalisation, specific years, number of banks nationalised, objectives, and outcomes, especially the creation of RRBs in 1975 following the Narasimham Committee recommendations.
Key Concepts
- **First Phase (1969)**: On 19 July 1969, Indira Gandhi's government nationalised 14 major commercial banks with deposits over ₹50 crore each, bringing approximately 85% of bank deposits under government control. This was done through the Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, 1969.