Nationalization refers to the transfer of public sector assets to be operated or owned by the state or central government. In India, the banks which were previously functioning under the private sector were transferred to the public sector by the act of nationalization and thus the nationalized banks came into existence.
Reasons for the Nationalization of Banks
- For Social Welfare
- For Developing Banking Habits
- For Expansion of Banking Sector
- For Controlling Private Monopolies
- To Reduce Regional Imbalance
- For Prioritizing Sector Lending
The government through the Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, 1969, and nationalized the 14 largest commercial banks on 19 July 1969. These lenders held over 80 percent of bank deposits in the country. Soon, the parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received presidential approval on 9 August 1969.
The banks that were nationalized included Allahabad Bank, Bank of Baroda, Bank of India, Bank of Maharashtra, Central Bank of India, Canara Bank, Dena Bank, Indian Bank, Indian Overseas Bank, Punjab National Bank, Syndicate Bank, UCO Bank, Union Bank and United Bank of India.
Thereafter, in 1980, six more banks that were nationalized included Punjab and Sind Bank, Vijaya Bank, Oriental Bank of India, Corporate Bank, Andhra Bank, and New Bank of India.