Need of banks nationalization:

                The developmental goals of financial intermediation were not being achieved other than for some favoured large industries and established business houses. Whereas industry‚Äôs share in credit disbursed by commercial banks almost doubled between 1951 and 1968, from 34 per cent to 68 per cent, agriculture received less than 2 per cent of total credit. Other key areas such credit to exports and small-scale industries were also neglected. The stated purpose of bank nationalization was to ensure that credit allocation occur in accordance with plan priorities.

When exactly nationalization of banks started:

Many people think that the nationalization of banks was done in the rule of Mrs. Indira Gandhi, but actually it started in the year 1955 by nationalizing the Imperial bank of India in the name State Bank of India, under the SBI act of 1955. The nationalization of banks continued thereafter. The next major incident was the nationalizing the seven subsidiary banks of SBI with deposits over 200 crore rupees, on 19th July 1960. The seven nationalized banks on that were,

1.       State Bank of Bikaner and Jaipur (SBBJ),

2.       State Bank of Hyderabad (SBH),

3.       State Bank of Indore (SBIR),

4.       State Bank of Mysore (SBM),

5.       State Bank of Patiala (SBP),

6.       State Bank of Saurashtra (SBS) and

7.       State Bank of Travancore (SBT).  

Nationalization in full form:

However the major nationalization of banks was done in the year 1969 under the govt. of Mrs. Indira Gandhi, by nationalizing 14 major commercial banks in India.  At the time of nationalization the priority sector concept was introduced by bringing agriculture, small-scale industry, retail trade, small business and small transport operators under its fold. It was made mandatory for banks to provide the 40% of their net credits to the priority sectors. The 14 banks nationalized in the year 1969 were,

1.       Central Bank of India

2.       Bank of Maharashtra

3.       Dena Bank

4.       Punjab National Bank

5.       Syndicate Bank

6.       Canara Bank

7.       Indian Bank

8.       Indian Overseas Bank

9.       Bank of Baroda

10.   Union Bank

11.   Allahabad Bank

12.   United Bank of India

13.   UCO Bank

14.   Bank of India

The second phase of nationalization was done in the year of 1980, in which seven more banks were nationalized with the deposits over 200 crore rupees. With this, the Government of India held a control over 91% of the banking industry in India. After the nationalization of banks there was a huge jump in the deposits and advances with the banks.

The main objective of nationalization of banks in India was to provide the better banking infrastructure in rural areas and to make cheap finance available to farmers in India.