Nationalization — Set 1

Correct Answer: A. Reserve Bank of India

• **Reserve Bank of India** = nationalized on January 1, 1949 — it was originally established in 1935 as a privately held institution under the RBI Act, 1934, and nationalization made it a fully state-owned central bank. • **RBI Act, 1934 vs. nationalization 1949** — the RBI Act created the bank; it took a separate legislative act in 1949 to bring it under government ownership, after which the government gained power to issue binding directions to it. • This was a precursor to commercial bank nationalisation; the Banking Regulation Act, 1949 was passed the same year, giving RBI regulatory power over commercial banks. • 💡 State Bank of India is wrong — SBI was formed in 1955 from Imperial Bank; Punjab National Bank is wrong — it was nationalised in 1969; Central Bank of India is wrong — it was nationalised in 1969, not 1949.

Correct Answer: B. 14

• **14 banks** = exactly 14 major commercial banks were nationalised on July 19, 1969 by Indira Gandhi's government under the Banking Companies (Acquisition and Transfer of Undertakings) Ordinance. • **The 14 banks**: 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 of India, United Bank of India. • The criterion was deposits of ₹50 crore or more; these 14 banks together held over 85% of total bank deposits in India. • 💡 6 is wrong — that is the count in the second phase (1980); 10 is wrong — no nationalisation wave had 10 banks; 20 is wrong — 20 is the combined total of both phases.

Correct Answer: C. Rs. 50 Crores

• **₹50 crore deposit threshold** = banks with deposits of ₹50 crore or more were selected for nationalisation in 1969, targeting the largest private commercial banks that dominated the credit market. • **Contrast with 1980** — the second phase (April 15, 1980) used a higher threshold of ₹200 crore, capturing the next tier of large private banks (6 banks). • This deposit-based criterion ensured the government took over institutions that controlled the bulk of public savings, leaving smaller private banks untouched. • 💡 Rs. 25 Crores is wrong — no threshold was set at this level; Rs. 100 Crores is wrong — that falls between the two actual thresholds; Rs. 10 Crores is wrong — far too low, would have nationalised hundreds of small banks.

Correct Answer: C. 1980

• **April 15, 1980** = the second phase of bank nationalisation occurred on this date, when 6 more commercial banks were brought under government ownership, completing the major nationalisation drive. • **6 banks nationalised in 1980**: Andhra Bank, Corporation Bank, New Bank of India, Oriental Bank of Commerce, Punjab & Sind Bank, Vijaya Bank — all with deposits exceeding ₹200 crore. • This second wave was carried out when Indira Gandhi returned to power; the threshold was ₹200 crore, four times the 1969 criterion. • 💡 1991 is wrong — that year saw economic liberalisation and partial privatisation, the opposite of nationalisation; 1975 is wrong — no major nationalisation occurred then; 1985 is wrong — no bank nationalisation wave in that year.

Correct Answer: B. Indira Gandhi

• **Indira Gandhi** = she was Prime Minister when 14 banks were nationalised on July 19, 1969; she announced the decision via a national radio broadcast, issuing an ordinance since Parliament was not in session. • **Political context** — the nationalisation happened shortly after Indira Gandhi split from the old Congress leadership (the 'Syndicate'); it was a populist move aligned with her slogan 'Garibi Hatao'. • She also oversaw the second phase in 1980 (6 banks), making her the PM responsible for both waves of commercial bank nationalisation. • 💡 Morarji Desai is wrong — he was PM from 1977–1979 (Janata Party) and was actually opposed to nationalisation; Jawaharlal Nehru is wrong — he died in 1964; Lal Bahadur Shastri is wrong — he was PM 1964–1966, before the 1969 nationalisation.

Correct Answer: C. Rs. 200 Crores

• **₹200 crore threshold** = in the 1980 phase, banks with demand and time liabilities exceeding ₹200 crore were nationalised — four times the ₹50 crore threshold used in 1969. • **6 banks captured**: Andhra Bank, Corporation Bank, New Bank of India, Oriental Bank of Commerce, Punjab & Sind Bank, and Vijaya Bank all met this criterion and were nationalised on April 15, 1980. • After this second wave, the combined total of nationalised commercial banks (excluding SBI and RBI) reached 20. • 💡 Rs. 100 Crores is wrong — this was the threshold for neither wave; Rs. 500 Crores is wrong — far higher than any threshold used; Rs. 150 Crores is wrong — this figure was never the official criterion.

Correct Answer: D. State Bank of India

• **State Bank of India** = the Imperial Bank of India was nationalised on July 1, 1955 and renamed as State Bank of India under the State Bank of India Act, 1955. • **Imperial Bank's origin** — Imperial Bank was itself formed in 1921 by merging three presidency banks: Bank of Bengal (1806), Bank of Bombay (1840), and Bank of Madras (1843). • The creation of SBI was recommended by the All India Rural Credit Survey (A.D. Gorwala) Committee to extend institutional credit to rural areas; SBI was deliberately kept separate from the 1969 nationalisation wave. • 💡 Union Bank of India is wrong — it was a private bank nationalised in 1969; Canara Bank is wrong — it was a private bank nationalised in 1969; Bank of Baroda is wrong — it was nationalised in 1969, not formed from Imperial Bank.

Correct Answer: D. Vijaya Bank

• **Vijaya Bank** = it was NOT in the 1969 wave; Vijaya Bank was nationalised in the second phase on April 15, 1980, as it met the ₹200 crore threshold by then. • **The 1969 list included**: Dena Bank ✓, Canara Bank ✓, and Allahabad Bank ✓ — all three options A, B, C were among the 14 nationalised in 1969. • Vijaya Bank was later merged with Bank of Baroda in 2019, along with Dena Bank, as part of the government's PSB consolidation. • 💡 Dena Bank is wrong as an answer — it WAS nationalised in 1969; Canara Bank is wrong as an answer — it WAS nationalised in 1969; Allahabad Bank is wrong as an answer — it WAS nationalised in 1969 and later merged with Indian Bank (2020).

Correct Answer: D. Banking Companies (Acquisition and Transfer of Undertakings) Act

• **Banking Companies (Acquisition and Transfer of Undertakings) Act** = this was the specific legislation enacted to legally nationalise the 14 banks in 1969; it transferred ownership of assets, liabilities, and management to the central government. • **Ordinance first, Act later** — nationalisation was initially carried out via an ordinance (July 19, 1969); this was challenged in the Supreme Court in R.C. Cooper vs Union of India, after which Parliament passed a fresh Act with better compensation provisions. • This Act (and its 1980 counterpart) remains the primary law governing Public Sector Banks today. • 💡 RBI Act, 1934 is wrong — it governs the Reserve Bank itself, not commercial bank nationalisation; Banking Regulation Act, 1949 is wrong — it gives RBI power to regulate banks but does not nationalise them; SBI Act, 1955 is wrong — it only applies to the creation of State Bank of India.

Correct Answer: B. To facilitate credit to priority sectors like agriculture

• **Credit to priority sectors** = the core goal was to redirect bank credit towards agriculture, small industries, and weaker sections that private banks had ignored in favour of large urban businesses. • **Branch expansion** — nationalisation triggered massive rural branch expansion; the number of bank branches grew from ~8,000 in 1969 to over 60,000 by the 1990s, reaching unbanked villages. • Other stated objectives included: prevention of concentration of economic power, 'Mass Banking' replacing 'Class Banking', and mobilising savings from rural areas. • 💡 Reducing bank employees is wrong — nationalisation actually increased employment in banking; encouraging foreign investment is wrong — it did the opposite, reducing foreign control; maximising profits is wrong — profitability was secondary to social goals like rural credit.