Nationalization — Set 5

Correct Answer: C. 1969

• **July 19, 1969** = PM Indira Gandhi announced the nationalisation of 14 major private commercial banks by a presidential ordinance; it came into effect immediately, targeting banks with deposits above ₹50 crore. • **14 banks nationalised in 1969** — Allahabad Bank, Bank of Baroda, Bank of India, Bank of Maharashtra, Canara Bank, Central Bank of India, Dena Bank, Indian Bank, Indian Overseas Bank, Punjab National Bank, Syndicate Bank, UCO Bank, Union Bank of India, United Bank of India. • The move was politically marketed under the slogan 'Garibi Hatao' (remove poverty) and gave the government control over about 85% of total bank deposits. • 💡 1955 is wrong — that year Imperial Bank became SBI, not a wave of commercial bank nationalisation; 1980 is wrong — that was the second wave (6 banks); 1947 is wrong — banks remained private at independence; India's first nationalisation step was RBI in 1949.

Correct Answer: D. 1949

• **January 1, 1949** = RBI was nationalised through the Reserve Bank of India (Transfer to Public Ownership) Act, 1948, making it a fully government-owned central bank. • **Before nationalisation** — RBI was established on April 1, 1935, as a private shareholders' bank under the Reserve Bank of India Act, 1934; its first Governor was Osborne Smith. • After nationalisation, C.D. Deshmukh became the first Indian Governor of RBI (he was already Governor before nationalisation — he continued in the role). • 💡 1935 is wrong — that is when RBI was established, not when it was nationalised; 1969 is wrong — that was the first wave of commercial bank nationalisation; 1950 is wrong — by 1950 RBI had already been nationalised a year earlier.

Correct Answer: D. State Bank of India

• **State Bank of India** = formed on July 1, 1955, when the Imperial Bank of India was taken over and reconstituted under the State Bank of India Act, 1955; the RBI held 60% stake initially. • **Imperial Bank's history** — it was itself created in 1921 by merging the three Presidency Banks (Bank of Bengal, Bank of Bombay, Bank of Madras); it acted as a quasi-central bank before RBI was established in 1935. • SBI is today the largest public sector bank in India, with over 22,000 branches and 500 million+ customers. • 💡 Punjab National Bank is wrong — it was established in 1894 as a private Indian bank and nationalised in 1969; Reserve Bank of India is wrong — it was established in 1935 and nationalised in 1949; Bank of Baroda is wrong — it was founded in 1908 and nationalised in 1969, not formed from Imperial Bank.

Correct Answer: A. 6

• **6 banks** = nationalised on April 15, 1980, targeting private commercial banks with deposits above ₹200 crore; PM Indira Gandhi again signed the ordinance. • **The six banks** — Andhra Bank, Corporation Bank, New Bank of India, Oriental Bank of Commerce, Punjab & Sind Bank, and Vijaya Bank; this brought total nationalised banks to 20. • New Bank of India was later merged into PNB in 1993, and the remaining five from this wave have undergone further mergers in 2019–2021. • 💡 20 is wrong — that is the total count after both waves, not the second-wave addition; 14 is wrong — that was the first wave (1969); 8 is wrong — no nationalisation round involved 8 banks.

Correct Answer: C. 51%

• **51%** = the statutory minimum government ownership in a public sector bank; this confers majority voting control and lets the government appoint the board and implement social banking priorities. • **Why not 100%?** — PSBs are listed on stock exchanges; investors hold the remaining up to 49%, providing market discipline and raising capital without full privatisation. • The government has been gradually reducing stake in some PSBs (e.g., bringing SBI stake closer to 57%) while keeping it above the 51% floor. • 💡 25% is wrong — a 25% stake is a minority holding with no controlling power; 75% is wrong — there is no such mandatory minimum for PSBs; 49% is wrong — 49% would make the government a minority shareholder, meaning the bank would not be classified as a public sector bank.

Correct Answer: A. RBI

• **RBI (Reserve Bank of India)** = the very first financial institution to be nationalised in India, on January 1, 1949, through the RBI (Transfer to Public Ownership) Act, 1948 — well before any commercial bank was nationalised. • **Timeline** — RBI nationalised (1949) → Imperial Bank became SBI (1955) → 14 commercial banks nationalised (1969) → 6 more nationalised (1980). • Nationalising RBI gave the government direct control over monetary policy, currency issuance, and credit regulation before expanding public ownership to commercial banks. • 💡 SBI is wrong — it was formed in 1955 by converting the Imperial Bank, six years after RBI; BOI (Bank of India) is wrong — it was nationalised in the first commercial wave in 1969; PNB is wrong — Punjab National Bank was also nationalised in 1969, 20 years after RBI.

Correct Answer: C. Social welfare and rural development

• **Social welfare and rural development** = the stated goal was to convert 'class banking' into 'mass banking' — spreading credit to farmers, small traders, artisans, and the rural poor who had no access to private banks. • **Concrete problems it addressed** — private banks concentrated 60–70% of credit in a few large cities to a handful of business houses; rural areas and priority sectors were starved of institutional credit. • Post-nationalisation, the Priority Sector Lending norm (40% of bank credit to agriculture, SMEs, weaker sections) was enforced, fundamentally redirecting the flow of bank funds. • 💡 To increase profits is wrong — nationalisation actually reduced profit focus in favour of social goals, lowering returns initially; To help large industries is wrong — it was specifically meant to break the grip of large industrial houses on bank lending; To reduce taxes is wrong — taxation is unrelated to bank ownership.

Correct Answer: B. Rs. 50 Crores

• **₹50 crore** = the deposit threshold set by PM Indira Gandhi for the 1969 first-wave nationalisation; 14 private banks with deposits exceeding this amount were taken over on July 19, 1969. • **Why ₹50 crore?** — it captured the largest private commercial banks that controlled the bulk of deposits while excluding smaller regional and cooperative banks; the 14 banks collectively held ~85% of all bank deposits. • The 1980 second wave raised the threshold to ₹200 crore, catching 6 more banks that had grown since 1969. • 💡 ₹10 crore is wrong — no nationalisation threshold was set at this figure; ₹100 crore is wrong — this figure was never used as a threshold in either wave; ₹200 crore is wrong — that was the threshold for the second wave in 1980, not the first.

Correct Answer: C. Punjab National Bank

• **Punjab National Bank (PNB)** = nationalised in the first wave on July 19, 1969; it is one of India's oldest banks (founded 1894) and today the second-largest PSB by business volume after SBI. • **Private banks in the options** — HDFC Bank, ICICI Bank, and Axis Bank (originally UTI Bank) were all granted new private sector licences in 1994 following Narasimham Committee I (1991) recommendations for banking sector liberalisation. • PNB has absorbed multiple banks through mergers: New Bank of India (1993), Oriental Bank of Commerce, and United Bank of India (both 2020). • 💡 HDFC Bank is wrong — it is a private bank incorporated in 1994; ICICI Bank is wrong — it converted to a universal bank in 2002 but remains private; Axis Bank is wrong — it was incorporated in 1993 as UTI Bank, a new private sector bank, not a PSB.

Correct Answer: C. New Bank of India

• **New Bank of India** = merged with PNB in September 1993 — the first-ever merger of one nationalised bank into another; it was forced by RBI due to New Bank's mounting losses and poor asset quality. • **New Bank of India** was one of the 6 banks nationalised in the second wave of 1980 and had operations mainly in Punjab and Haryana; its failure reduced the count of nationalised banks from 20 to 19. • This merger set a precedent for the 2019–2020 mega-mergers where 10 PSBs were consolidated into 4. • 💡 Andhra Bank is wrong — it merged with Union Bank of India in 2020, not PNB; Dena Bank is wrong — it merged with Bank of Baroda in 2019; Vijaya Bank is wrong — it also merged with Bank of Baroda in 2019.