Nationalisation of Banks in India

What are the reasons that lead to Nationalisation of banks? In view of the reluctance of Commercial Banks, before 1969, to finance small business ventures and agriculture and opening up of branches in rural areas, compelled the Government of India to take over the control of banks by nationalising them.  Nationalisation of Banks A significant milestone in Indian Banking happened in the late 1960s when the government nationalised on 19th July, 1969 14 major commercial Indian Banks. The second wave of nationalisation took place in 1980 with 6 more commercial banks got nationalised. The stated reason for the nationalisation was more control of credit delivery. After this, until the 1990s, the nationalised banks grew at a leisurely pace of around 4%. In 1993, New Bank of India was amalgamated with Punjab National Bank.  Post 1990 Liberalisation, Privatisation and Globalisation took place and took the banking industry to new heights. Technological advancement started by migrating from manual to computerisation of records. Narasimham Committee recommendations on prudential norms for Non Performing Assets were adopted which resulted in healthy growth of banks asset portfolio.  Narasimham Committee Report 1991 &1998 The Narasimham committee was set up in order to study the problems of the Indian Financial system and to suggest some recommendations for improvement in the efficiency and productivity of the financial institutions.  The committee had given the following major recommendations: Reduction in SLR and CRR: The committee recommended the Reduction of the higher proportion of the statutory liquidity ratio and cash reserve ratio. Both of these ratios were very high at that time. The SLR was 38.5 percent and CRR was 15 percent. This high percentage of SLR and CRR meant locking the bank resources for govt uses. SLR was recommended to be from 38.5 to 25 percent and CRR from 15 percent and 3.5 percent.  Phasing out of Directed Credit programme: Since Nationalisation, Directed Credit programmes were adopted by the Government. The committee recommend Phasing out of this programme. This programme compelled banks to earmark their financial resources for the needy and poor sectors at concessional rates of interest.  Interest Rate Determination: The committee felt that the interest rates in India were regulated and controlled by the authorities. The committee recommended eliminating Government controls on interest rates and Phasing out the concessional interest rates for the priority sector.  Structural Reorganization of the Banking Sector:  The committee recommended that the actual number of public sector banks need to be reduced. Three to four large banks including SBI should be developed as international banks. Eight to ten banks having nationwide presence should concentrate in the National and universal banking services.  Local banks should concentrate on region specific banking. Regarding RRBs, it recommended that they should focus on agriculture and rural financing.  Establishment of the ARF and Tribunal: The proportion of bad debts and non-performing assets of the public banks and Development Financial institute was very alarming in those days. The committee recommended the Establishment of an assets reconstruction fund. This fund would take over the proportion of the bad and doubtful debts from the banks and financial institutes. It would help banks to get rid of bed debts.  Removal of Dual Control:  The committee recommended the stopping of this system. It considered and recommended that the RBI should be the only main agency to regulate banking in India.  Banking autonomy:  The committee recommended that the public sector banks should be free and autonomous. Banking technology upgradation would thus be easy. Narasimham Committee Report II – 1998 In 1998 the Government appointed yet another committee under the chairmanship of Mr. Narasimham. It was told to review the banking reform progress and design a programme for further strengthening the financial system of India. The committee focused on various areas such as capital adequacy bank mergers bank legislation. It submitted its report to the Government in April 1998 with the following recommendations: Strengthening the Banks in India Narrow Banking Capital Adequacy Ratio Bank Ownership Review of Banking Laws Apart from these major recommendations the committee has also recommended faster computerisation, technology upgradation, training of staff, depoliticizing of banks, professionalism in banking, reviewing bank recruitment etc.  Banks in India:  Banks in India are broadly categorised in to three types. Public Sector Banks Private Sector Banks Foreign Banks Under Public sector banks Nationalised Banks State Bank of India and their subsidiaries Regional Rural Banks Scheduled Banks Scheduled Banks in India constitute those banks which have been included in the second schedule of RBI act 1934. RBI includes only those banks in this schedule which satisfy the criteria laid down vide section 42(6a) of the Act. All public sector banks in India are scheduled.  Regional Rural Banks The government of India set up Regional Rural Banks (RRBs) on October 2, 1975 [10]. The banks provide credit to the weaker sections of the rural areas, particularly the small and marginal farmers, agricultural labourers, and small entrepreneurs. Initially, five RRBs were set up on October 2, 1975 which was sponsored by Syndicate Bank, State Bank of India, Punjab National Bank, United Commercial Bank and United Bank of India. The total authorized capital was fixed at Rs. 1 Crore which has since been raised to Rs. 5 Crores.  Unscheduled Banks “Unscheduled Bank in India” means a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), which is not a scheduled bank”.  Public Sector / Nationalised Banks Sl No Name of the Bank Head Office Year of Commencement 1 Allahabad Bank Kolkata 1865 2 Andhra Bank Hyderabad 20th Nov, 1923 3 Bank of Baroda Baroda (Vadodara) 20th July, 1908 4 Bank of India Mumbai 7th September, 1906 5 Bank of Maharashtra Pune 1935 6 Bharatiya Mahila Bank New Delhi 2013 7 Canara Bank Bangalore 1906 8 Central Bank of India Mumbai 21 December, 1911 9 Corporation Bank Mangalore 1906 10 Dena Bank Mumbai 1938 11 IDBI bank Mumbai July, 1964 12 Indian Bank Chennai 1907 13 Indian Overseas Bank Chennai February 10th, 1937 14 Oriental Bank of Commerce New Delhi February 19th, 1943 15 Punjab National Bank New Delhi 1895 16 Punjab & Sind Bank New Delhi 1908 17 Syndicate Bank Manipal 1925 18 UCO Bank Mumbai 6th January, 1943 19 Union Bank of India Kolkata 11th November, 1919 20 United Bank of India Kolkata 1950 21 Vijaya Bank Bangalore 1931 22 ECGC Mumbai 30th July, 1957 State Bank of India and its Subsidiaries State Bank of India has 5 associate banks viz. State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore. State Bank of Saurashtra and State Bank of Indore are merged into SBI. Sl No Name of the Bank Head Office Year of Commencement 1 State Bank of India Mumbai 1st July, 1955 2 State Bank of Hyderabad Hyderabad 8th August, 1941 3 State Bank of Mysore Bangalore 2nd October, 1913 4 State Bank of Patiala Patiala 1st April, 1960 5 State Bank of Bikaner & Jaipur Jaipur 1963 6 State Bank of Travancore Thiruvananthapuram 12th September, 1945 7 State Bank of Saurashtra Merged into SBI on 13th August, 2008 8 State Bank of Indore Merged into SBI on 2010 Private-sector banks Axis Bank Catholic Syrian Bank City Union Bank Development Credit Bank Dhanlaxmi Bank Federal Bank HDFC Bank ICICI Bank IndusInd Bank ING Vysya Bank Karnataka Bank Karur Vysya Bank Kotak Mahindra Bank Lakshmi Vilas Bank Nainital Bank Tamil Nadu Mercantile Bank South Indian Bank YES Bank UP Agro Corporation Bank List Foreign Banks Operating in India Abu Dhabi Commercial Bank Australia and New Zealand Bank Bank International Indonesia Bank of America NA Bank of Bahrain and Kuwait Bank of Ceylon Bank of Nova Scotia (Scotia Bank) Bank of Tokyo Mitsubishi UFJ Barclays Bank PLC BNP Paribas Calyon Bank Chinatrust Commercial Bank Citibank N.A. Credit Suisse Commonwealth Bank of Australia (Recently Launched Retail Services in Mumbai) DBS Bank DCB Bank now RHB Bank Deutsche Bank AG FirstRand Bank HSBC JPMorgan Chase Bank Krung Thai Bank Mashreq Bank PSC Mizuho Corporate Bank Royal Bank of Scotland Shinhan Bank Société Générale Sonali Bank Standard Chartered Bank State Bank of Mauritius UBS Woori Bank Regional Rural Banks in AP and Telangana (Grameena Banks)  Name of Bank Banks Amalgamated Sponsor Bank Head Office Chaitanya Godavari Grameena Bank Chaitanya Grameena Bank Godavari Grameena Bank Andhra Bank Brodipet, Guntur Saptagiri Grameena Bank Kanakdurga Grameena Bank Shri Venkateswara Grameena Bank Indian Bank Chittoor Deccan Grameena Bank Golconda Grameena Bank Sri Rama Grameena Bank Sri Saraswathi Grameena Bank Sri Sathavahana Grameena Bank State Bank of Hyderabad Nallakunta, Hyderabad Andhra Pradesh Grameena Vikas Bank Kakathiya Grameena Bank Manjira Grameena Bank Nagarjuna Grameena Bank Sangameshwara Grameena Bank Sri Visakha Grameena Bank State Bank of India Hanmakonda, Warangal Andhra Pragathi Grameena Bank Pinakini Grameena Bank, Rayalseema Grameena Bank Sree Anantha Grameena Bank Syndicate Bank Kadapa Some Important Facts about Banks in India  First bank established in India: Bank of Hindustan in 1770 Second bank: General Bank of India, 1786 Oldest bank in India – State Bank of India First Indian bank got ISO - Canara Bank First India bank started solely with Indian capital investment is PNB (Punjab National Bank)  Founder of Punjab National Bank is Lala Lajpat Rai Reserve bank of India (RBI) was instituted in 1935 First governor of RBI: Mr.Osborne Smith First Indian Governor of RBI: Mr. C D Deshmukh First bank to introduce savings account in India: Presidency Bank in 1833 First bank to introduce cheque system in India: Bengal Bank in 1833 First bank to introduce internet banking: ICICI bank First bank to introduce mutual fund: State Bank of India First bank to introduce credit card in India: Central Bank of India Plastic money is known as – Credit Cards Open market operations are carried out by – RBI Capital market regulator is – SEBI Largest Commercial bank in India – State Bank of India Minimum money transfer limit through RTGS: 2 Lakhs Maximum money transfer limit through RTGS: No Limit Minimum & Maximum money transfer limit through NEFT: No Limit NABARD was established in – July, 1982 Largest Public sector bank in India – SBI Largest Private sector bank in India – ICICI Bank Largest Foreign bank in India – Standard Chartered BankFirst Indian bank to open branch outside India (London in 1946): Bank of India First RRB named Prathama Grameen Bank was started by: Syndicate Bank First Bank to introduce ATM in India: HSBC in1987, Mumbai Which bank has maximum number of overseas branches: Bank of Baroda  FDI limit for new banks – 49% FDI limit for private banks: 74% Download:   Statewise List of RRBs:

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Published on 8/1/2014 12:29:00 PM

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