There is no need to restart the cliched debate on the pros and cons of bank nationalisation. Myth has it that nationalisation was required to improve credit delivery to agriculture and small-scale industry and establish branches in areas not served. If one looks further back, there was the spectre of bank failures between 1913 and 1948, when 1,100 banks failed. But since 1935 (nationalised in 1948), we had the Reserve Bank of India (RBI) and from 1949, we had the Banking Regulation Act. Weren’t these enough to address issues of regulation? It was under these that social control was introduced in December 1967 and a National Credit Council set up to advise RBI and government on credit allocation. Restrictions were imposed on composition of boards of directors and on bank lending to units that directors were interested in. If two All India Rural Credit Surveys of 1951 and 1954 still harped upon lack of rural credit and cooperatives and one strong commercial banking institution to drive these, Imperial Bank was nationalised and made State Bank of India (SBI) in 1955. One can’t get more imperious than Imperial Bank.

If it was credit delivery one wanted, there were sufficient instruments, without nationalisation of 14 banks in 1969/70 and six more in 1980. But then, credit delivery or populism of the late 1960s and early 1970s was only one part of the jigsaw. The preamble to the Banking Companies Act of 1970 stated, this was “an Act to provide for the acquisition and transfer of the undertakings of certain banking companies, having regard to their size, resources, coverage and organisation, in order to control the heights of the economy and to meet progressively, and serve better, the needs of development of the economy in conformity with national policy and objectives and for matters connected therewith or incidental thereto.” This preamble was again repeated in 1980, with Articles 39(b) and (c) of the Constitution thrown in.

... contd.