Gopabandhu Mohapatra

Indira Gandhi

On 19th July 1969, with the objective to make the banks contribute for the growth of country and to take the services of the banks available to the common masses, 14 major banks were nationalized by the Government. The objective by the Government was the growth of economy and prosperity of the nation through social banking. With the foresighted vision of the then Prime Minister, Mrs. Indira Gandhi, common masses could get access to the banking facility, which till then was available only to the elite classes.


The objective behind nationalization was all round economic growth towards nation building and to shift focus from ‘class banking’ to ‘mass banking’. The focus was shifted to provide desired support by way of credit to Agriculture and other identified Priority Sectors instead of handful capitalists. Thereafter 6 more banks were nationalized on 20th April 1980.

The nationalized banks have played their role to perfection during this period of 50 years. Since then, there has not been any looking back and there has been remarkable growth.The main achievements of nationalization of banks was expansion of bank branch, financial accommodation to the neglected sections, financing to the unemployed youth and to support the sick industrial units. NABARD, SBI and Public sector banks contributed immensely for the national economic development in general and agriculture and small and marginal farmers in particular.  Present MUDRA loans is the avatar of many earlier schemes formulated in the aftermath of nationalisation of Banks, like asset based loan scheme of IRDP, PMRY, SEEUY, SEPUP etc . This IRDP Scheme made a great dent in reduction of poverty.

public sector banks

As per available data, no. of Branches (Including RRBs) have increased from 8268 during 1969 to more than 138850 as at the end of 2018-19. The number of Rural branches has exceed more than 50,000. The total deposit of Rs. 4646 Crore as on 1969 has gone up to Rs. 125,72,553 Crore and the total advance has gone from Rs. 3599 crores to 97,69,191 Crore as on 2018-19. Loans to agriculture Sector has increased from 162 Crore to 6,69,400 Crores.

After nationalization and followed by globalization and improvement of communication technology, there was large scale money flows, money changing, money transfers and trade. The western government and bankers met at Basle and declared that minimum of 8% capital adequacy was necessary for banks to do business in international market. Except State Bank of India, none other banks could meet the criteria. In order to overcome the situation, the Nasarimham Committee recommendations was accepted to meet the Basle conditions and resulted in merger of banks to improve the capital base.


Then came the liberlisation, which was spear headed by World Trade Organisation. India having joined the WTO, it was duty bound to implement the stipulations and with this the ideals of nationalization has gone and the democratic capitalist ideals of unshackling the small producer from his debt burden has vanished. Gone too are the concepts of welfare state.

The banking industry in India is undergoing a transformation since the beginning of liberalization. Interest rates have declined considerably but there is evidence of under-lending by the banks. The “social” objectives of banking measured in terms of rural credit are, expectedly, taking a back seat.


At present the banking sector as a whole and particularly the public sector banks suffer from considerable NPAs. New legal developments like the SARFAESI Act provides new options to banks in their struggle against NPAs. The adoption of Basel-II norms however imply new challenges for Indian banks as well as regulators.  Presently, the banking industry is under severe stress and analysts warn that banks will be able to recover only half their NPAs due to the current economic depression.

The poor performance of the public sector banks, which accounted for about 90% of all commercial banking, was rapidly becoming an area of concern. The continuous escalation in non-performing assets (NPAs) in the portfolio of banks posed a significant threat to the very stability of the financial system.

On the anniversary date of Bank Nationalisation, let banking industry rededicate to the cause of common masses of the country and take a pledge to protect Public Sector status of the Nationalised Banks.

(Mr. Gopabandhu Mohapatra is a retired banker and writes on a variety of subjects with a focus on Banking and Finance. He can be reached at


  1. Nice and detailed narration. In 50 years the time has come full circle.The objective for which the nationalisation was effected in banks on two occasions lost its sheen over a period of time as the priorities seems to have changed. But still it has its presence in jandhan yojna, Mudra yojna, startups as there is still a very high %age of population are in the lower rung of society. And banks cannot look other way around even if mallya, modis , choksis fled the country by looting banks. Whether nationalised, merged, privatised the demand of the poor has to be met.

  2. A lot of facts and figures make this article a good one to read and get it to the analysis. As far as nationalization is concerned bankers should be continuously scanned by investigated agencies to make the banking system more clear, better and transparent.


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