Bid Adieu To Public Sector! These 14 Indian Commercial Banks Were Nationalised Today In 1969

On July 19, 1969, then Prime Minister of India, Indira Gandhi, addressed the nation at 8:30 pm and announced to nationalise 14 Indian commercial banks, which had control of over 85 per cent of bank deposits in the country. The banks shortlisted for nationalisation were Bank of India, Bank of Baroda, Central Bank of India, Canara Bank, Punjab National Bank, United Bank of India, and Allahabad Bank.

The argument given by the government over this exasperating step was that banks were failing to serve the interest of farmers, the credit line for agricultural farming, focusing on small-scale industries and startups. The government shortlisted the banks based on the capital stock reserve. The banks with a capital of 50 Cr or more in the account were selected to be nationalised.

The move by then PM Indira Gandhi is considered a masterstroke though its economic benefits remain debatable. Backing the radical decision beside Indira Gandhi were Principal Secretary P.N. Haksar, Economist P.N. Dhar, and K.N. Raj, reported CNBC TV18.

The banking division official of the Ministry of Finance, through his biography 'No Regrets', says that he rushed to work after he received a phone call on midnight of July 17 from Haskar to be part of a team which is drafting the ordinance in 24 hours. The rush to draft the ordinance within 24 hours was made so that the acting president V.V. Giri could sign it a day before making the notification public.

Supreme Court Intervention

Many banks were left affected, dragging this decision to a court of law. On February 10, 1970, the Supreme Court held the passed Act as 'void' and 'discriminatory' against those 14 banks and said that the compensation paid to the banks was not fair.

The government then rushed to prepare a new ordinance which was issued on February 14 which was later replaced by the Banking Companies Act, 1970 (Acquisition and Transfer of Undertakings).

After the decision to make banks a public sector unit, Indira Gandhi might have become a villain for those affected banks, but subsequently, it shored up her as a champion for farmers and struggling entrepreneurs across India. The process to nationalise banks continued through her tenure as in 1980, she nationalised another six commercial banks.

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