When was banks nationalized

The Indian financial sector underwent a tectonic shift 50 years ago this week, when the Indira Gandhi government nationalized the 14 biggest commercial lenders on 20 July The second volume of the official history of the Reserve Bank of India describes bank nationalization as the single-most important economic policy decision taken by any government after Central bank historians say that in terms of the impact, even the economic reforms of pale in comparison.

The landmark decision came at the end of a troubled decade. India was buffeted by economic as well as political shocks. There were two wars—with China in and Pakistan in —that put immense pressure on public finances.

Two successive years of drought had not only led to food shortages, but also compromised national security because of the dependence on American food shipments to keep hunger at bay. Fiscal retrenchment through a three-year plan holiday had hurt aggregate demand as public investment was cut. The devaluation of the rupee was an economic success, but also a lightning rod for political anger. The Congress party had already suffered electoral setbacks in the elections.

It was headed for a split. The Naxalites were growing in strength. However, the devaluation had helped improve the balance of payments while the Green Revolution began to ease the food constraints. India was at a crossroads. Many other countries in Asia had switched to more market-oriented policies in the preceding years, even within the overall industrial policy framework. Their growth would accelerate over the next two decades. In India, there had been some tentative moves in that direction during the short tenure of Lal Bahadur Shastri.

However, Indira Gandhi swung the other way with the support of the Left. Bank nationalization was one of her responses to the economic and political challenges of the time. The impact of bank nationalization can be thought about in terms of three core areas: deposits, lending and interest rates.

The one positive impact of bank nationalization was that financial savings rose as lenders opened new branches in areas that were unbanked. There are 61 scheduled banks in Bangladesh who operate under full control and supervision of Bangladesh Bank which is empowered to do so through Bangladesh Bank Order, and Bank Company Act, Scheduled Banks are classified into following types:. Now, 34 FIs are operating in Bangladesh while the maiden one was established in Out of the total, 2 is fully government owned, 1 is the subsidiary of a SOCB, 15 were initiated by private domestic initiative and 15 were initiated by joint venture initiative.

The major difference between banks and FIs are as follows:. Sitemap Disclaimer. Now, banks in Bangladesh are primarily of two types: Scheduled Banks : The banks that remain in the list of banks maintained under the Bangladesh Bank Order, Off the cuff, I said the number could be 10 to 12 banks.

He piped up that it was a golden political opportunity to nationalise all banks and that we should go ahead with the bold decision. Haksar waived his suggestion politely and requested him to keep his impetuous radicalism to himself.

Haksar wanted to be left alone till he himself had been fully briefed on a subject that was entirely foreign to him. I then asked him if the Prime Minister had made up her mind on nationalising the banks.

The date was crucial for two reasons. They were ideologically also similar and were exceedingly close personal friends. It was Bakshi who had given the seal of approval to Ghosh and had joined the duo late that night of 17 July for confabulations.

The next day, Ghosh writes, the prime minister herself summoned him in the morning. She wanted to be convinced that the legislative draft for nationalisation of banks could actually be prepared in less than 24 hours. When she was told that such a draft had, in fact, existed from the end of when nationalisation of five banks had first been considered, she appeared to relax and swore Ghosh to absolute secrecy saying that in case of any hitch he should apprise PNH.

For the next few hours, Haksar, Bakshi, Ghosh and a few others who had been specially commandeered for this purpose, like RK Seshadri an RBI official and Niren De attorney general slogged to prepare the ordinance — which was an executive order that would have to be ratified by Parliament later.

This was one speech of hers which had not been written or even worked upon by Haksar. In his memoirs, Patel takes some pride — and rightly so — in the authorship of this landmark speech of Indira Gandhi:. I drafted the Cabinet paper and the speech for Mrs Gandhi Not a word I wrote was changed by Haksar or Mrs Gandhi next morning He may have been all that is rumoured.