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July 28, 2014

Nationalization of Commercial Banks


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The Nationalization of commercial banks opened new vistas before the banking system as a whole and gave new dimensions of the economy. It assumes greater significance and implied a revolutionary change in the principles and objectives of the credit policy of commercial banks. In the field of commercial banking, the first seed of nationalization were sown in the year 1955 when the Govt. nationalized the imperial bank of India and named it as State Bank of India. In the year 1960, on the recommendations of the committee the All-India Rural Credit survey Eight State-association, banks were taken over as subsidiaries of the State Bank of India. The Govt. of India Nationalized 14 major commercial banks in July 1969 and another 6 banks in April 1980. The nationalization of July 1969 and April 1980 was a unique phenomenon, different from that of  nationalization of the RBI in 1949 or the nationalization of Imperial bank of India in 1955, as these were very modest having little socio-economic change in the country. Before and after Nationalization of commercial Banks, a section of people has described it as momentary and timely, while others criticized it as wrong and untimely.

Objectives of Nationalization of Banks

The Banking companies (Acquisition and Transfer of Undertakings) Act 1970 Under which the private banks were nationalized with effect from 19th July 1969 specified the aim of the nationalization of commercial banks as "to control the heights of the economy and to meet progressively and serve better the needs of development of the economy in conformity with national policy and objectives and for matters connected therewith or incidental thereto". More precisely, the specific objectives of the nationalization of private sector commercial banks were outlined by the Prime Minister of India Mrs. Indira Gandhi in her statement in the Parliament on 21st July 1969. The are as under,
  1. The removal of Control by a few
  2. To provide credit towards priority sector such as agriculture, small industry, exports and weaker sections.
  3. To give a professional bent to bank management.
  4. To mobilize savings of people by opening more branches in rural areas and utilize the funds for productive purpose.
  5. To provide adequate training as well as reasonable terms of service to bank staff.
  6. To ensure that the operations of the banking systems are guided by a large social purpose and subject to close pbublic regulation.
  7. To curb the use of bank credit for speculative and other unproductive purpose.
  8. To serve in a better way the requirements of the development of the economy in conformity with the state policy and objectives.
  9. To actively fasten the growth of the new and progressive entrepreneurs and create fresh opportunities for hitherto neglected and backward areas in different parts of the country.
  10. To help in accelerating the tempo of economic development.
The nationalization of banks opened new vistas before the banking system as a whole and grave new dimensions to the growth of the economy. Nationalized banks have been recognized as the most potent instruments for strengthening the Forces of socialism. Nationalization has given birth to a "Socially-motivated banking system", whose credit policy is purpose oriented with the objectives spreading the banking habit throughout the country. Today, the  commercial banks are fulfilled the above all objectives set at the time of Nationalization.

That's all for now friends. In our next post we shall discuss about some arguments for and against the Nationalization of Commercial Banks. Happy Reading :) 


  1. Hi , can any one let me know if after applying for IBPS PO 4 and payment mode is through offline but for got to pay the challan within 3 working days so automatically application gets rejected , is there any chance to apply again. Please advise

    1. Of course u can apply again...that is why they give that facility


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