The first major step was Nationalization of the Imperial Bank of India in 1955 via State Bank of India Act.
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State Bank of India was made to act as the principal agent of RBI and handle banking transactions of the Union and State Governments.
In a major process of nationalization, 7 subsidiaries of the State Bank of India were nationalized by the Indira Gandhi regime. In 1969, 14 major private commercial banks were nationalized. These 14 banks Nationalized in 1969 are as follows:
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Central Bank of India
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Bank of Maharastra
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Dena Bank
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Punjab National Bank
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Syndicate Bank
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Canara Bank
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Indian Bank
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Indian Overseas Bank
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Bank of Baroda
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Union Bank
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Allahabad Bank
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Union Bank of India
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UCO Bank
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Bank of India.
The above was followed by a second phase of nationalization in 1980, when Government of India acquired the ownership of 6 more banks, thus bringing the total number of Nationalised Banks to 20. The private banks at that time were allowed to function side by side with nationalized banks and the foreign banks were allowed to work under strict regulation.
- After the two major phases of nationalization in India, the 80% of the banking sector came under the public sector / government ownership.
Please note the following sequence of events:
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Creation of Reserve bank of India: 1935
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Nationalization of Reserve Bank of India : 1949 (January )
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Enactment of Banking Regulation Act : 1949 (March)
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Nationalization of State Bank of India : 1955
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Nationalization of SBI Subsidiaries : 1959
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Nationalization of 14 major Banks : 1969
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Creation of Credit Guarantee Corporation: 1971
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Creation of Regional Rural Banks : 1975
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Nationalization of 7 more banks with deposits over Rs. 200 Crore: 1980
The result was outstanding. The public deposits in these banks increased by 800% , as the government ownership gave the public faith and trust.
The third phase of development of banking in India started in the early 1990s when India started its economic liberalization.
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