NATIONALIZATION OF BANKS IN INDIA- OBJECTIVES & IMPACT

NATIONALIZATION OF BANKS IN INDIA- OBJECTIVES & IMPACT

Introduction

In India, Nationalization of banks was started from 1949. The Reserve Bank of India, the first bank in India was nationalized in January 1949. Then after 14 other banks were nationalized in July 1969. After that 6 other commercial banks were nationalized in 1980.

Objectives behind Nationalization

• Controlling private monopolies.
• Expansion of banking & Reducing regional Imbalance.
• Boost Priority sector lending.
• To develop and enhance banking habits.

Impacts of Nationalization

• The efficiency of the banking system is improved and it boosted the confidence of customer base in banks. 
• It increased the penetration of banks and their operations mainly in the rural and remote areas of the country.
• It leads to an increase in the funds and capital of the banks and their utilization in economic activities in the country.

Nationalization in 1969

• The Indian government nationalized 14 major private banks (commercial banks) in 1969.
• Later in 1980, 6 more private banks were nationalized.

See also… BANKING SYSTEM IN INDIA- AN OVERVIEW

Merger after Nationalization

In 1993, the government merged New Bank of India with Punjab National Bank and it was the only merger between nationalized banks. As a result, nationalized banks reduced from 20 to 19.

• The largest consolidation exercise in banking history of India be effective from 1 April, 2017.
• SBI merger– Five associate banks, state bank of Bikaner & Jaipur, state bank of Hyderabad, state bank of Mysore, state bank of Patiala and state bank of Travancore merged in SBI under SBI Act, 1955. Others two state bank of saurashtra and state bank of Indore got merged in 2008 and 2010. Apart from these Bhartiya Mahila Bank also merged with SBI.
• Latest Bank Merger in India– The government of India consolidated 10 Public Sector Banks into 4 banks. The announcement of this mega-merger was made by Union Finance Minister Nirmala Sitharaman in 2019. However, RBI notified it in late March through its circular to merge banks in the new financial year (1st April 2020). As per the finance minister, the merger would help to manage the capital more efficiently. The amalgamation of the PSBs is based on bad loan intensity and regional factors.
  Punjab National Bank (PNB) has taken over the Oriental Bank of Commerce and the United Bank of India as an anchor bank, Canara Bank has taken over Syndicate Bank, Union Bank of India itself has taken over Andhra Bank and Corporation Bank. and Indian Bank will take over the Allahabad bank. Earlier, State Bank of India with five of its associate banks while Vijaya Bank and Dena bank were merged with Bank of Baroda.
• After this merger, the country is having a total of 12 public sector banks, including the State Bank of India and Bank of Baroda. This results in seven large public sector banks and five smaller ones. There were as many as 27 PSBs in 2017.

Below is list of Nationalized Banks in India 2021 After Merger

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

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