Origination of Bank Nationalization

Origination of Bank Nationalization

In this article, I am going to give the details of bank nationalization and its origination. So, bank nationalization means any bank whose ownership (at least 51% of it) is owned by the government then, it is called a public sector bank otherwise it is a private sector bank.

So, this is a very important classification that every nationalized bank is a public sector bank but not vice versa. So, not every public sector bank is a nationalized bank. So, for example, the IDBI bank is not a nationalized bank but it is still a public sector bank. It used to be a public sector bank but it is not a public sector in any mode.

Nationalized bank means that a bank that was earlier owned by private individuals. That Bank CSP when the government actually subsumes control so, 51% comes within government control. At that time, it was called a nationalized bank so this is what nationalization means and after nationalization, it becomes a public sector bank with 51% government ownership.

Phase 1 of bank nationalization (1969-1970)

 After that, an act, known as the acquisition and transfer of undertaking act, took place in 1970. As per this act, the National Association had actually taken place. This act actually came in 1969 but it actually took place in 1970 because the supreme court of India had actually objected to a few clauses of the 1969 version of this act.

So, in 1970 they had to amend it and it was the final act that actually covered this entire nationalization process. So, phase one is one of this nationalization that was done on 19 July 1969 which is a very important date. 14 banks were nationalized and these banks comprise 85% of the total deposits of the banking system in India.

So, 85% of the total deposits were present in these 14 banks that got phase 1 nationalization. These nationalized banks had a deposit base of greater than 50 crore rupees. So, in 1969 we had the nationalization of many banks that did not exist right now because one of the banks, Allahabad Bank was merged into the Indian bank, and Dena Bank was merged into the Bank of Baroda.

The Syndicate Bank was merged into the Canara bank and also, and we have the United Bank of India which was merged into the Punjab National Bank. So, these banks do not exist anymore. 

Phase 2 of bank nationalization (1980)

Now, we are going to talk about phase 2 bank nationalization. In phase 2, there was another nationalization that took place on 15 April 1980. 6 banks were nationalized and after this nationalization was completed. A total of 91% of the banking industry came under the control of the Government of India. This time, the deposit base was 200 cr.

The threshold upon which it was decided was above 200 crores. So, if the deposit base was above that, then, that bank got nationalized. So, there were 6 banks that were nationalized in 1980. Right now, the corporation bank and Andhra Bank, both of these banks have actually been merged into the Union Bank of India and the Vijaya Bank has now merged into

the Bank of Baroda and the Oriental Bank of India has merged into the Punjab National Bank Csp. The socialist agenda of the government was fully in play and the rural sector got some amount of credit it was going very well but still, it was seen that the financial inclusion did not happen as they actually wanted. So, in 1969 there was the lead Bank scheme,

this scheme actually allowed each and every Bank to take control of a certain district in the country, and in that district, they would actually help all the financial activities they would do financial awareness and all kinds of financial inclusion activities would be done by those banks. 

Lead Bank Scheme and RRBs Setup.

The Lead Bank scheme also became very popular at that point in time for financial inclusion and after that, in 1975 we all know the regional rural banks were set up. So, this was a very important event in Indian banking history. The first RRB was the Pratham bank which was sponsored by the Syndicate bank and was opened in Uttar Pradesh. So, this is when the regional rural banks actually took place and this is how the 1960s to 1980s went and banking was still in its nascent stage.

how many nationalized bank in india?

As of my knowledge cutoff of September 2021, there were 12 nationalized banks in India. However, please note that this information may have changed since then. The 12 nationalized banks are:

  1. Bank of Baroda
  2. Bank of India
  3. Canara Bank
  4. Central Bank of India
  5. Indian Bank
  6. Indian Overseas Bank
  7. Punjab and Sind Bank
  8. Punjab National Bank
  9. State Bank of India
  10. UCO Bank
  11. Union Bank of India
  12. United Bank of India

Please note that in addition to these nationalized banks, there are also several other public and private sector banks operating in India.

at present how many nationalized banks are in India?

As of my knowledge cutoff in March 2023, there were 12 nationalized banks in India. However, please note that the current number may have changed since then due to various factors such as mergers, acquisitions, or changes in government policies.

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