Indira Gandhi nationalized 14 private banks in the year 1969, which was of great benefit.
In Budget 2021, Finance Minister Nirmala Sitharaman announced the privatization of two public sector banks. Apart from this, an insurance company will also be privatized. After the budget announcement, Chief Economic Advisor KV Subramaniam welcomed the decision to privatize state-run banks in an interview with Bloomberg. He said that this is just the beginning. In the coming days, there will be only four to less public sector banks in the country.
KV Subramaniam said that in future banking will join the strategic sector and there will be only 4 public sector banks in the country. Apart from this, all banks are privatized. Currently there are 12 public sector banks in the country. After the announcement of privatization of 2 banks, this will come down to 10. Looking at the history, on July 19, 1969, the country’s immediate Prime Minister and Finance Minister Indira Gandhi nationalized 14 big private banks. With this decision, the government controlled 80 percent of the banking assets. In the third volume of the history of the Reserve Bank of India, the decision to nationalize was described as more important and effective than the decision of liberalization of 1991.
As of 2017 there were 27 government banks
Narendra Modi was appointed Prime Minister of the country for the first time in 2014. This is his second term and the government is moving fast in the direction of privatization of banks. As of 2017, there were a total of 27 government banks in the country. For the first time in 2017, five associate banks and Bharatiya Mahila Bank were merged with State Bank of India. Apart from this, Vijaya Bank and Dena Bank were merged with Bank of Baroda. This decision was taken by the Modi government in April 2017. But the big question here is how much merger or privatization of state-run banks will be successful. On one hand, Indira Gandhi nationalized the banks and opened new doors for the banking sector. At the same time, the condition of banking sector in the last few years is pointing to something else.
6 banks merged into 4 banks in 2020
The government then announced the merger of 10 banks. Under this, the existence of six banks was merged into four banks, after which 12 government banks remained in the country. Last year, Oriental Bank of Commerce and United Bank of India were merged with Punjab National Bank. Syndicate Bank merged with Canara Bank. Allahabad Bank was merged with Indian Bank. Union Bank of India and Andhra Bank were merged with Corporation Bank.
Also Read: SBI ATM: If you withdraw money from SBI ATM, know these new rules or else the fine will be levied
What was the benefit of nationalization?
The decision to nationalize banks was not taken in the same way. Before 1969, the country was poor and there were complaints that private banks give loans to corporates but they do not give loans for agriculture. According to another Bloomberg report, till 1951, agriculture’s share in banking loans was just 2 per cent. This was till 1967. At the same time, the share of corporate lending rose from 34 percent to 64.3 percent. In such a situation, when the decision to nationalize was taken, then loans for agriculture increased. Today’s situation is different. If the number of state-run banks will come down to 4 in the coming days, what will be its losses, it can be easily ascertained from the developments in history.
