Nationalization — Set 6

Correct Answer: B. C.D. Deshmukh

• **C.D. Deshmukh (Sir Chintaman Dwarkanath Deshmukh)** = was the first Indian Governor of RBI (appointed July 1943) and continued in the role when RBI was nationalised on January 1, 1949 — making him the first Governor of the nationalised RBI. • **Key milestones** — Deshmukh guided India's monetary policy through the turbulent Partition period and independence; he later served as India's Finance Minister (1950–56) and was a key architect of India's first Five Year Plan. • Osborne Smith was the first ever Governor of RBI (1935–37), but he was British and served before nationalisation. • 💡 Benegal Rama Rau is wrong — he was the 4th Governor of RBI (1949–57), succeeding Deshmukh after nationalisation; James Taylor is wrong — he was the 2nd Governor of RBI (1937–43), also pre-nationalisation and British; Osborne Smith is wrong — he was the 1st ever Governor (1935), pre-nationalisation.

Correct Answer: A. Rs. 200 Crores

• **₹200 crore** = the deposit threshold above which 6 banks were nationalised in the second wave on April 15, 1980 — four times the ₹50 crore threshold used in 1969. • **6 banks in 1980** — Andhra Bank, Corporation Bank, New Bank of India, Oriental Bank of Commerce, Punjab & Sind Bank, Vijaya Bank; PM Indira Gandhi again signed the ordinance. • After 1980, India had 20 nationalised banks + SBI + 7 SBI associates = a commanding public sector banking presence covering over 90% of deposits. • 💡 ₹50 crore is wrong — that was the threshold for the first wave (1969, 14 banks); ₹100 crore is wrong — never a nationalisation threshold in either wave; ₹500 crore is wrong — no nationalisation round used this figure.

Correct Answer: C. Mumbai

• **Mumbai (State Bank Bhavan, Nariman Point)** = SBI's corporate headquarters has been in Mumbai since 1956 when it was reconstituted from the Imperial Bank; Mumbai is India's financial capital. • **Imperial Bank was headquartered in Kolkata** — when SBI was formed in 1955, the registered office shifted to Mumbai to align with India's commercial banking hub. • SBI also has a large administrative presence in New Delhi (for government banking) but its statutory head office is Mumbai. • 💡 New Delhi is wrong — it hosts government ministries and RBI's main office but is not SBI's headquarter city; Kolkata is wrong — Imperial Bank was there, but SBI moved HQ to Mumbai; Chennai is wrong — SBI has regional offices there but no national headquarters.

Correct Answer: D. Vijaya Bank

• **Vijaya Bank** = nationalised in the second wave on April 15, 1980, when its deposits exceeded the ₹200 crore threshold; it was based in Bengaluru and primarily served Karnataka. • **Vijaya Bank's end** — it was merged into Bank of Baroda in April 2019 (along with Dena Bank), one of the first mergers under the 2019–2020 government consolidation drive. • The 1980 wave also included Andhra Bank, Corporation Bank, New Bank of India, Oriental Bank of Commerce, and Punjab & Sind Bank. • 💡 Indian Bank is wrong — it was nationalised in the first wave of 1969 (₹50 crore threshold); Bank of Baroda is wrong — also 1969 nationalisation, founded in 1908 in Baroda; Canara Bank is wrong — nationalised in 1969, headquartered in Bengaluru.

Correct Answer: A. 3

• **3 Presidency Banks** = the Bank of Bengal (1806), Bank of Bombay (1840), and Bank of Madras (1843) merged in January 1921 to form the Imperial Bank of India. • **Role of Imperial Bank** — it acted as a quasi-central bank (keeping government accounts, managing public debt) until the Reserve Bank of India was established in 1935; after that it functioned only as a commercial bank. • In 1955, the Imperial Bank was nationalised and reconstituted as State Bank of India under the SBI Act, 1955. • 💡 4 is wrong — only three Presidency Banks existed and merged; 5 is wrong — no fifth bank was involved in the 1921 merger; 2 is wrong — two banks merging would not have covered all three Presidency regions (Bengal, Bombay, Madras).

Correct Answer: C. Agriculture

• **Agriculture** = the biggest beneficiary of bank nationalisation was the farm sector; Priority Sector Lending (PSL) norms required banks to direct 40% of adjusted net bank credit to agriculture and allied activities. • **Measurable impact** — agricultural credit from commercial banks jumped from ₹162 crore in 1969 to over ₹3,000 crore by 1980; rural branch density increased from 22% to over 58% of all branches. • Cheap institutional credit replaced exploitative moneylenders and made adoption of Green Revolution technology financially possible for small farmers. • 💡 Foreign Trade is wrong — nationalised banks focused on domestic priority sectors, not export finance (that was mainly EXIM Bank's role); Information Technology is wrong — IT was not even a sector in 1969; Stock Market is wrong — nationalisation was specifically designed to redirect credit away from speculative capital markets towards productive sectors.

Correct Answer: A. Dena Bank

• **Dena Bank** = no longer exists as an independent entity — it was merged into Bank of Baroda on April 1, 2019, along with Vijaya Bank; it was originally nationalised in the first wave of 1969. • **Dena Bank's history** — founded in 1938 as Devkaran Nanjee Bank, nationalised in 1969; it was placed under RBI's Prompt Corrective Action (PCA) framework in 2017 due to high NPAs, which accelerated its merger. • The 2019 three-way merger (Dena + Vijaya → Bank of Baroda) was the first major PSB merger since New Bank of India merged with PNB in 1993. • 💡 Bank of India is wrong — it remains an active, independent nationalised bank; UCO Bank is wrong — it is still a functioning PSB headquartered in Kolkata; Central Bank of India is wrong — it continues to operate as an independent nationalised bank.

Correct Answer: B. RBI

• **RBI (Reserve Bank of India)** = the statutory regulator and supervisor of all scheduled commercial banks in India, including all nationalised (public sector) banks, under the Banking Regulation Act, 1949. • **RBI's regulatory powers** — it sets CRR, SLR, repo rate, issues banking licences, enforces capital adequacy norms, and places weak banks under Prompt Corrective Action (PCA) framework to prevent failure. • The Finance Ministry is the owner of PSBs (as the majority shareholder) but RBI is the independent regulator — a distinction important for exam purposes. • 💡 Finance Ministry is wrong — it owns PSBs but does not regulate day-to-day banking operations; SEBI is wrong — it regulates securities markets, not banks (though it regulates banks when they issue shares); NABARD is wrong — it is a development finance institution that refinances rural credit, not a bank regulator.

Correct Answer: D. To remove control of few business houses

• **To remove control of few business houses** = the R.K. Hazari report (1967) found that a handful of large industrial conglomerates (Tata, Birla, etc.) effectively controlled India's biggest private banks and directed credit to themselves, starving other sectors. • **Policy solution** — nationalisation severed the ownership link between industrial houses and banks, ensuring lending decisions would henceforth follow priority sector and social goals rather than private profit. • Post-nationalisation, bank credit flow to the unorganised sector, small farmers, and rural borrowers increased dramatically. • 💡 To stop international banking is wrong — PSBs actually expanded international operations after nationalisation (e.g., Bank of Baroda, SBI abroad); To reduce rural branches is the exact opposite — nationalisation mandated rural branch expansion; To encourage private monopoly is wrong — the entire point was to break up private concentration of financial power.

Correct Answer: D. 14

• **14 banks** = nationalised on July 19, 1969, by PM Indira Gandhi through a presidential ordinance (later converted to the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1969); all had deposits above ₹50 crore. • **The 14 banks** — 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. • These 14 banks collectively controlled about 85% of bank deposits in India; the nationalisation was the largest single transfer of private banking assets to the state in Asia at that time. • 💡 10 is wrong — no nationalisation round involved exactly 10 banks; 20 is wrong — 20 was the total count after the second wave in 1980 (14 + 6); 16 is wrong — this figure does not correspond to any nationalisation wave.