It was realised that the step was imperative, as the then PM declared in the Lok Sabha, “Public ownership and control of commanding heights of national economy and its strategic sectors are imperative and essential aspects of the new social order which we are trying to build in the country.” The ordinance was brought at a time when fourth five-year plan with its targets of public and private participation were concretising and there was notable progress in investment and production to promote self-reliance. The ordinance was to nationalise all scheduled banks incorporated in our country with minimum deposit of fifty crore at the end of June, 1969.

The banks were nationalised to achieve certain reformative goals. There was an unholy alliance between the banks and the corporates and the latter was sucking up the bank finance for their own self-promotion. Nationalisation was aimed at breaking this alliance. The step was also taken to expand banking in the rural areas to help peasants by giving them credit. It was also possible after nationalisation to extend credit to small producers, and deprived sections of the society that suffered at the hand of the usurers. The credit thus flowing was to reach not only the regions but also the various sections of the population. After nationalisation the number of branches too went up.

Almost half of 10543 new branches that came up between 1969-75 were to offer support in the rural areas and thus the share of the agrarian sector went up from 17 per cent to 36 per cent. Also, total credit share rose from 2.2 per cent in 1967 to nine percent in 1975. By 1989, it was 15.8 per cent. Twenty-two public sector banks came up in just five years. Thus the distribution of credit was also regularised after nationalisation which also helped bringing credibility and restraining the factors that led to the failure of banks. The nationalised banks played their own role in helping evolve the country as one of the major developing economies.

The Communist Party of India took the most supportive stand and said, “There cannot be slightest doubt that the nationalisation of 14 banks is a major reverse for the forces of Indian monopoly capitalists and its neo-colonial allies.” In 1969 itself, the CPI had said that privatisation was a step towards retrieval and also offensive that the monopolies are planning. Explaining the major reasons why CPI stood by the step, it was said that two interests have clashed, and in this one lobby has taken the side of the agriculturists, rich peasantry, medium and small capitalists, where lie the real interest of the national bourgeoisie in this country. And it is this interest that has decided to attack the stronghold of monopoly capital, which is banking sector and therefore it is a welcome step.

Today, the age of reversal has stepped in, with initiatives to privatise banks, especially as shift is prominently towards liberalisation and servitude towards the monopolies.

The slow but pronounced presence of private sector banks has started eroding the role of public sector banks bringing its share in total assets of the scheduled commercial banks from 80 per cent in 1997-98 to 66 per cent in 2017-18.

The public ownership in the public sector banks has also declined with four out of 19 active such banks, government equity has gone down to less than 75 per cent, and one of the largest banks, the State Bank of India, the fall is down to 58 per cent. Agrarian sector has been also suffering as the number of branches have declined from 50 per cent in 2000 to 36 per cent in 2018.

With growing role of monopoly capital, the follow up is not a surprise. The steps to privatise, and hand over the public sector banks to the private corporate vested interest, the agenda of finance capital has been unveiled and the character of the ruling regime has come in the open. (IPA Service)