Hindutva supporters make claims about how many of the technological advances of the West were known in ancient India. Bank nationalisation by Indira Gandhi is acquiring a similar status today. The West, it is claimed, is now trying to make its financial system safe by embracing bank nationalisation. This narrative holds that our wise sages knew this all along. We anticipated meltdowns like those of 2008 and nationalised our private banks much ahead of time in 1969.

To set the record straight, let us begin with what the West is doing. Northern Rock in the United Kingdom was the first significant “nationalisation” in the current crisis. The UK government has subsequently passed the SRR (Special Resolution Regime) for failing banks. The SRR provides the authorities with the power to place a failing bank into TPO, or “temporary public ownership”. The public document released alongside it, arguing for a case for such a regime, says: “Had the authorities been able to have placed Northern Rock into an SRR at an earlier stage, when more of its value remained, it is possible that part or all of the bank could have been sold to a private sector buyer. This would have avoided the need to impose additional potential losses on the taxpayer by having to nationalise the bank.”

In other words, the UK was an unwilling nationaliser. The conditions under which the banks have been put in public ownership, largely as a move to enhance their capital and to provide confidence among depositors, are very different from nationalising banks with the intent to run them and pre-empt credit and resources. In the West, when these banks become healthy, they will be privatised. There are no plans for the UK Treasury setting up a banking division to do their corporate governance.

... contd.