Nationalization — Set 4

Correct Answer: A. Oriental Bank of Commerce

• **Oriental Bank of Commerce** = one of the 6 banks nationalised on April 15, 1980, when deposits exceeded ₹200 crore threshold set by PM Indira Gandhi. • **6 banks in 1980** — Andhra Bank, Corporation Bank, New Bank of India, Oriental Bank of Commerce, Punjab & Sind Bank, Vijaya Bank; OBC was later merged into Punjab National Bank in 2021. • After 1980, India had 20 nationalised banks (14 from 1969 + 6 from 1980), making the public sector dominant in banking. • 💡 Union Bank of India is wrong — it was nationalised in the first wave of 1969; Indian Overseas Bank is wrong — also 1969 (₹50 crore threshold); Bank of Maharashtra is wrong — also a 1969 nationalisation.

Correct Answer: A. SBI (Subsidiary Banks) Act

• **SBI (Subsidiary Banks) Act, 1959** = the legislation that enabled SBI to take over eight former state-associated princely-state banks as its subsidiaries (one was later demerged, leaving seven). • **Seven associate banks** — State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala, State Bank of Saurashtra, State Bank of Travancore, State Bank of Indore; all eventually merged into SBI by 2017. • This created a two-tier SBI network: the parent bank plus regional subsidiaries serving their home states. • 💡 RBI Act is wrong — it governs the central bank, not SBI subsidiaries; Associate Banks Act does not exist as legislation; Banking Regulation Act 1949 governs bank licensing and operations, not SBI's takeover of subsidiaries.

Correct Answer: C. State Bank of Saurashtra

• **State Bank of Saurashtra** = the first SBI associate bank to be merged into SBI, completed in August 2008 — it served the Saurashtra region of Gujarat. • **Sequence of SBI associate mergers** — Saurashtra (2008) → State Bank of Indore (2010) → remaining five associates merged together in April 2017, creating the largest bank merger in Indian history. • The 2017 mega-merger made SBI the 45th largest bank in the world by total assets. • 💡 State Bank of Hyderabad is wrong — it merged in 2017; State Bank of Travancore is wrong — also 2017; State Bank of Indore is wrong — it was the second to merge, in 2010, not the first.

Correct Answer: B. 20

• **20 nationalised banks** = 14 banks nationalised in 1969 + 6 banks nationalised in 1980 = 20 total public sector commercial banks (excluding SBI and its associates). • **The count later fell** — New Bank of India merged with PNB in 1993 (reducing to 19), and subsequent 2019–2020 mergers further reduced the number to 12 nationalised banks. • Together with SBI + 7 SBI associates (in 1980), the public sector commanded over 90% of Indian banking deposits. • 💡 14 is wrong — that was only the first-wave count from 1969; 19 is wrong — that came after the 1993 NBI-PNB merger; 21 is wrong — no nationalisation round produced this figure.

Correct Answer: C. Bank of India

• **Bank of India** = a fully independent nationalised bank (nationalised 1969), never a subsidiary or associate of SBI — it has always operated separately under its own management. • **SBI associates were regional** — they originated as banks of former princely states (Patiala, Bikaner & Jaipur, Mysore, Hyderabad, Travancore, Saurashtra, Indore) and were brought under SBI through the SBI (Subsidiary Banks) Act, 1959. • All seven SBI associates were merged into the parent SBI in 2017, ceasing to exist as separate entities. • 💡 State Bank of Patiala is wrong — it was a genuine SBI associate (Patiala princely state); State Bank of Bikaner is wrong — it was SBI's associate (later expanded to State Bank of Bikaner & Jaipur); State Bank of Mysore is wrong — it was a valid SBI associate bank.

Correct Answer: C. Rural

• **Rural sector** = the RBI's branch licensing policy after 1969 required banks to open branches in unbanked rural areas for every urban branch they opened, dramatically expanding village banking. • **Numbers tell the story** — rural bank branches grew from about 1,833 in 1969 to over 35,000 by the mid-1980s; the rural branch share of total branches rose from 22% to over 58%. • This expansion directly supported the Green Revolution by channelling institutional credit to farmers for seeds, fertilisers, and equipment. • 💡 Urban is wrong — urban branches also grew but at a far slower rate; Foreign is wrong — nationalised banks focused on domestic expansion, not foreign offices; Metropolitan is wrong — metro areas were already well-served and received fewer new licences.

Correct Answer: A. At least 51%

• **At least 51%** = the Bank Nationalisation Acts and subsequent amendments mandate that the Central Government hold a minimum 51% equity stake in every public sector bank — this gives it voting control over the board. • **Practical significance** — the remaining stake (up to 49%) can be sold to the public via stock exchanges, which many PSBs have done, but the majority must always stay with the government. • The 2021 Budget saw NITI Aayog recommend privatising 2 PSBs, which would involve reducing government stake below 51%. • 💡 At least 26% is wrong — 26% is a blocking minority, not majority control; At least 100% is wrong — PSBs are listed on stock exchanges with public shareholders; At least 75% is wrong — there is no such statutory minimum for PSBs.

Correct Answer: C. 1956

• **1956** = Life Insurance Corporation of India (LIC) was established on September 1, 1956, through the Life Insurance Corporation Act, 1956, after the government nationalised 245 private life insurance companies. • **It preceded bank nationalisation by 13 years** — LIC's creation showed that the socialist policy of state control over key financial sectors was a long-term government agenda, not a one-off event. • LIC became the world's largest life insurer by policy count and listed on Indian stock exchanges in 2022 (though the government retained over 96% stake). • 💡 1969 is wrong — that is the year of bank nationalisation (first wave), not LIC; 1950 is wrong — no major insurance nationalisation happened then; 1949 is wrong — that was the year RBI was nationalised.

Correct Answer: D. Green Revolution

• **Green Revolution** = bank nationalisation (1969) enabled the government to channel cheap institutional credit to millions of small farmers who needed funds for High Yielding Variety seeds, chemical fertilisers, and irrigation — all central to the Green Revolution of the late 1960s–70s. • **Direct link** — priority sector lending norms introduced after nationalisation required banks to lend at least 40% of their credit to agriculture, small industries, and weaker sections. • Without affordable bank credit, most small farmers could not have adopted the new technology; moneylenders charged 30–50% interest versus 4–7% from banks. • 💡 White Revolution (Operation Flood, dairy) is wrong — it was led by NDDB, not bank credit; Blue Revolution (fisheries) is wrong — it came much later and did not depend on bank nationalisation; Silver Revolution (poultry/eggs) is wrong — it is unrelated to the 1969 nationalisation.

Correct Answer: D. United Bank of India

• **United Bank of India** = one of the 14 major commercial banks nationalised on July 19, 1969, with deposits above ₹50 crore; it primarily served West Bengal and the north-eastern states. • **United Bank's journey** — it was later merged into Punjab National Bank in April 2020 as part of the government's mega-merger of 10 banks into 4 large PSBs. • The 14 banks nationalised in 1969 collectively held about 85% of bank deposits in India at the time. • 💡 HDFC Bank is wrong — it was incorporated in 1994 as a new private bank after the Narasimham Committee reforms; Karnataka Bank is wrong — it remains a private sector bank headquartered in Mangaluru; Federal Bank is wrong — it is a private sector bank based in Kerala, never nationalised.