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Nationalization of Banks – Nation...

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Nationalization of Banks – Nationalized Banks

shape Introduction

Before 1949, all the commercial banks in India were exclusively owned, controlled and managed by private entrepreneurs. The process of nationalization of banks began with the nationalization of RBI on 1st Jan 1949, with the passing of Reserve Bank (Transfer of Public Ownership) Act, 1948. RBI was nationalized to ensure greater coordination of monetary, economic and fiscal policies in independent India.

shape Banks

  • The first step towards the nationalization of commercial banks started with the nationalization of the Imperial Bank of India as the State Bank of India on 1 July 1955.

  • After this the 7 State-associated banks were nationalized as subsidiaries of the State Bank of India in 1959.

  • The 7 associate banks were–the State Bank of Hyderabad,the State Bank of Jaipur and Bikaner, the State Bank of Travancore, the State Bank of Mysore, the State Bank of Patiala, the State Bank of Indore, and the State Bank of Saurashtra.

On 19th July 1969, 14 major commercial banks with deposits exceeding Rs. 50 crores were nationalized.

    1. Allahabad Bank
    2. Bank of Baroda
    3.Bank of India
    4. Bank of Maharashtra
    5. Canara Bank
    6. Central Bank of India
    7. Dena Bank
    8. Indian Bank
    9. Indian Overseas Bank
    10. Punjab National Bank
    11. Syndicate Bank
    12. Union Bank of India
    13. United Bank of India
    14. United Commercial Bank (now known as UCO bank)

On 15th April 1980, 6 more commercial banks were nationalized which were having the deposits above Rs.200 crores. The banks were:

    1. Andhra Bank
    2. Corporation Bank
    3. New Bank of India
    4. Punjab and Sind Bank
    5. Oriental Bank of Commerce
    6. Vijaya Bank

  • Because of the nationalization, the major segment of the banking sector came under the control of the Government.

  • The nationalization of banks imparted major impetus to branch expansion in unbanked, rural and semi-urban areas, which in turn resulted in huge deposit mobilization, thereby giving boost to the overall savings rate of the economy.

  • It also resulted in scaling up of lending to agriculture and its allied sectors.

  • The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 under which 14 banks were nationalized with effect from 19 July 1969 spelt the main objective as “to serve better the needs of development of the economy in conformity with national policy and objectives and for matters connected therewith or incidental thereto”.


These objectives included:

  • To mobilize the savings of the people to the largest possible extent and to utilize them for productive purposes.

  • To ensure the operations of the banking system for a larger social purpose and to subject them to close public regulation.

  • To meet the legitimate credit needs of private sector industry and trade, big or small.

  • To meet in an increasing manner the needs of productive sectors of the economy and in particular those of farmers, small scale industrialists and self-employed professional groups.

  • To actively foster the growth of the new and progressive entrepreneurs and credit fresh opportunities for hitherto neglected and backward areas in different parts of the country.

  • To curb the use of bank credit for speculative and other unproductive purposes;

  • To provide adequate training and reasonable terms of service to bank staff

  • To considerably expand the branch network of bank in all parts of the country, and to reduce regional and sectoral imbalance in banking and through that in economic development.

  • Five associates & the Bharatiya Mahila Bank became part of the State Bank of India (SBI) on 1st April 2017, catapulting the country’s largest lender to among the top 50 banks in the world.

  • State Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad (SCH), State Bank of Mysore (SBM), State Bank of Patiala (SBP) and State Bank of Travancore (SBT), besides Bharatiya Mahila Bank (BMB), merged with SBI with effect from April 1,2017.

  • The merged entity resulted in the deposit base of more than Rs 26 lakh crore and advances level of 18.50 lakh crore.

  • Post-merger, the bank will rationalize its branch network by relocating some of the branches to maximize reach.

  • This will help the bank optimize its operations and improve profitability

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