History of Banking in India : Phase-II

The Second Phase of banking in India starts from 1935 when Reserve Bank of India was established. Between the period of 1911-1948, there were more than 1000 banks in India, almost all small banks. The Reserve Bank of India was constituted in 1934 as an apex Bank, however without major government ownership. Immediately after the independence, the Government of India came up with the Banking Companies Act 1949. This act was later changed to Banking Regulation (Amendment) Act 1949. Further, the Banking Regulation (Amendment) Act of 1965 gave extensive powers to the Reserve Bank of India and via this act, the Reserve Bank of India was made the Central Banking Authority.

The banking sector reforms started immediately after the independence. These reforms were basically aimed at improving the confidence level of the public because in those days, most banks were not trusted by the majority of the people. Instead, the deposits with the Postal department were considered rather safe.

The first major step was Nationalization of the Imperial Bank of India in 1955 via State Bank of India Act. State Bank of India was made to act as the principal agent of RBI and handle banking transactions of the Union and State Governments.

After that, in a major process of nationalization, seven subsidiaries of the State Bank of India were nationalized via the State Bank of India (Subsidiary Banks) Act, 1959. In 1969, fourteen major private commercial banks were nationalized. These 14 banks Nationalized in 1969 are as follows:

[table id=70 /]

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. After the nationalisation of banks, the branches of the public sector banks in India rose to approximately 800 per cent in deposits, and advances took a huge jump by 11,000 per cent. Government ownership gave the public implicit faith and immense confidence in the sustainability of public sector banks.


33 Comments

  1. suresh

    April 21, 2011 at 10:23 am

    This is a test comment

    • Tribhuvan kumar

      May 3, 2014 at 10:42 am

      Sir, how much nationalise bank this time

  2. Anjaneya

    June 7, 2011 at 5:25 pm

    Sir, I believe on April 15,1980 Six more banks were nationalised (instead of 7 which you have mentioned) and the total number of nationalised banks became 20. In 1993 New bank of India was merged with Punjab National Bank and thus the number of nationalised banks came down to 19.

  3. Anjaneya

    June 25, 2011 at 12:10 am

    Thank you sir for updating the information. You are doing a great job for us. It is really commendable.

  4. mayank

    July 8, 2011 at 11:30 am

    first of all thank u very much . ur information give me a great knowledge . but in the above history there is some doubt from my side .the doubt is that SBI was not nationlized in 1955 from that time SBI is working under RBI . my economic’s sar said that in 1955 IMPERIAL BANK OF INDIA was only change in SBI . it was not nationlized . plz clear this doubt as soon as possiable

  5. seema

    July 14, 2011 at 10:10 pm

    thanks for the worthy knowledge……

  6. Niketa

    August 1, 2011 at 12:50 am

    Thanks for providing us amazing & incredible knowledge of Banking sector

  7. ajay

    August 17, 2011 at 10:37 pm

    great !!!
    best for ga

  8. nisha

    October 4, 2011 at 6:09 pm

    thank u sir

  9. sarna krish

    November 23, 2011 at 3:46 pm

    kudos !!!.Gud job.Pls try educating masses.U r capable of doing that.

  10. swati

    January 25, 2012 at 4:57 pm

    the best site for all the informations related to bank.

  11. sudhir kumar , saharsa bihar

    January 31, 2012 at 8:55 pm

    thanku sir
    its very very important information for us which helps to increase banking awernass for banking examination

  12. nisha saini

    March 15, 2012 at 1:56 pm

    sir my GA sir said that SBI is not a nationalized bank…. In 1955 it named SBI from IMPERIAL BANK…. please clear my doubt..
    Thank u..

    • GKToday

      March 19, 2012 at 1:58 pm

      Ask your sir to go back to fundamentals. Imperial Bank of India was nationalised (under the SBI Act of 1955)

      • shailendra sharma

        June 14, 2014 at 7:57 pm

        Sir i am agree with you that Imperial Bank Of India was nationalized under the SBI act of 1955 but SBI and IDBI is not a nationalized bank both are public sector bank.

  13. Shivam Raghav

    March 16, 2012 at 12:48 am

    Hello Sir…..

    All the content is precious but I have heard that SBI doesn’t a nationalized bank but here it is showing as a nationalized bank.

    Pls make me correct.

  14. saugata

    March 22, 2012 at 7:28 pm

    GKToday is absolutely right.
    SBI is nationalized in 1955. In 1980 there was 21 nationalized bank, later New Bank of India merged with PNB. Now no. of nationalized banks are 20.
    It is very easy to remember:
    19 nationalized bank is under IBPS. SBI is not under IBPS.

  15. srinivas

    February 15, 2013 at 9:03 am

    Thank you saugata sir for clearing

  16. Jitendra Sharma

    February 25, 2013 at 10:18 pm

    Gud job… please mention about Tax nd Influation…

  17. balu

    March 5, 2013 at 12:41 pm

    thanku so much… u guys r doing gr8t job ….
    u cant even imagine how much is this site is useful for those who r prepareing for competative exams..and cant afford much money for training centres…thanku and god bless u…

  18. selva

    July 3, 2013 at 9:15 pm

    Very useful news I liked…

  19. sujit kumar

    July 22, 2013 at 3:29 pm

    thank u sir

  20. Falguni

    August 1, 2013 at 3:56 pm

    thanx its really learning.

  21. kaplish

    August 5, 2013 at 5:36 pm

    i am in confusion.how many nationalized banks are there.whether 19 or 21since ibps in po3 has notified 21 banks and some websites are saying there are 21 others are saying 19..plz reply asap

  22. RAMESH

    February 7, 2014 at 1:40 pm

    19 NATIONALISED BANK.1 IDBI.1 ECGC..TOTALLED TO 21

  23. Ranjit

    July 10, 2014 at 9:35 pm

    sir, when I visit ur site I saw written there sbi is a nationalized bank. then i goes to sbi Wikipedia i didn’t saw anywhere write sbi is a nationalized bank. it just change his name from Imperial Bank of India TO SBI

  24. mitu

    August 1, 2014 at 10:00 am

    thank u very much sir for this information.

  25. athira.p

    August 3, 2014 at 12:56 pm

    Thankyou for this valuable information

  26. divya rastogi

    December 7, 2014 at 12:41 pm

    When IDBI and Bhartiya mahila bank were nationalized?
    Rply soon

  27. sakshi singh thakur

    December 21, 2014 at 3:19 pm

    Thanks for providing knowledge.

  28. vikashg

    May 2, 2015 at 12:14 am

    Comment when commercial bank nationalized for first time

  29. anoop

    July 9, 2015 at 6:27 pm

    On what basis banks were nationalised in India in 1969?

  30. Brijesh Nair

    September 1, 2015 at 4:27 pm

    Sir,
    I need a Clarification, It has been said that the nationalization of Bank Happened after adequately compensating the promoters . Could you please let me know how they were compensated??

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