How Many Banks Were Nationalized in 1969

Introduction

The nationalization of 14 private banks took place in 1969, by the ruling party of that time i.e., CONGRESS under the influence of Prime Minister Indira Gandhi. Banks play a very important role in the economy of a country. Banks provide their customers with a safe environment to keep their money and also provides interest in return.

Nowadays, banks become a part of everyday activities of our lives. In this growing technological era, we have got the advancement in technology through Net Banking and other E-banking facilities in the banking sector.

What is the need for the nationalization of banks?

Implementation of nationalized banks took place under the banking companies (Acquisition and Transfer of Undertakings) Act of 1970. This was done to serve the betterment of the company. The banking sector started playing a great role in the economy of a country. So, the government decided to nationalize the banks for providing benefits to the weaker section of society. Nationalization will bring up the chance to benefit the people of rural areas.

As the banks got nationalized, some power and responsibilities were distributed to the government. The government started working for the welfare of rural areas, farmers and the weaker sections of society. Banks started providing loans provided to farmers for buying agricultural products like pesticides, machinery and seeds. So, that they may serve the economy of the country. Loans for startups and education were also provided.

Significant points of nationalization

• Social welfare

• Controlling private monopolies

• Reduced urban-rural divide

• Expansion of banking in rural areas

• Benefits to backward areas of the country

Names of 14 nationalized banks of 1969

1. Allahabad Bank

2. Canara Bank

3. United Bank of India

4. UCO Bank

5. Syndicate Bank

6. Indian Overseas Bank

7. Bank of Baroda

8. Punjab National Bank

9. Bank of India

10. Bank of Maharashtra

11. Central Bank of India

12. Indian Bank

13. Dena Bank (now, known as Bank of Baroda)

14. Union Bank

Impacts of nationalization of the bank

Nationalisation proved to be a good impact on a short-run basis like the development of backward areas. The nationalization of banks filled the gaps between rural and urban areas, by providing loans to rural people, for small-scale industries, start-ups, farmers for agricultural needs etc. but it didn’t satisfy the main goal of nationalization i.e., raising the economy of a country. It proved to be a failure in some aspects. The list of those negative impacts is as follows:

1. Complicated interest rates: The nationalization of banks led to complicated interest rate structures in the banking sector. Different interest rates were set for different loan purposes. Due to these complications, banks were stuck in these hundreds of interest rates and the needy once could not benefit from loans provided by banks.

2. Reduction of competition between banks: The nationalisation of banks had reduced the competition between private and public banks. As public banks work under the government and had to follow some rules of government and cannot make their own decision for profit making, funding etc.

3. Inefficient: There was no strictness left for public banks to make a profit. There was no responsibility, accountability or incentives for the bank to progress. Public banks became a headache of delays for citizens of the country.

4. Long-term risks: After the nationalization of banks, there was instability in the banks. It proved to be a good option by providing loans for rural areas for agricultural needs and other needs. Citizens were not able to pay back loans and problems of overdue and fewer returns started being faced by banks.

Conclusion

As a result, the Nationalization of banks proved to be good on a small-run basis and in long run, it didn’t benefit much. The banking system has proven to be a significant asset in growing the economy of India. Even the public banks or nationalized banks have improved now, with improved systems and management. Recently, there is an increased call for the privatization of banks and banking is overall leading to economic prosperity in India.