Three years after the tsunami of criticism over the devaluation of the rupee had driven Indira Gandhi to a policy switch, from pragmatic to populist, she startled the country by nationalising 14 commercial banks. Most people thought this was the logical culmination of the populist surge but reality was complex. A bitter power struggle within the ruling party that was to lead to the first Congress split later had more to do with bank nationalisation than any other factor. The timing, July 1969, was dictated by the high-stake presidential election necessitated by the untimely death of President Zakir Husain, due in August.

In fact, the issue of bank nationalisation had been enlivening Indian political discourse since long before Indira Gandhi’s rise to power. In 1951, soon after Sardar Patel’s death, her illustrious father had invited socialist leader Jayaprakash Narayan, better known as JP, to join his government. JP had laid down 14 preconditions for cooperation, headed by immediate nationalisation of banks. Nehru dropped his initiative after telling JP: “If I could do all this, why would I need your help”?

Thereafter, the Leftists chorus for the takeover of banks was uninterrupted but Nehru and his successors had ignored it. However, the issue suddenly acquired salience after the 1967 general election in which the Congress party had lost nine states and suffered a loss of 87 seats in Parliament. The Congress Young Turks, led by Chandra Shekhar, later to become prime minister, demanded a series of radical measures to “win back the people’s confidence.” Bank nationalisation was on top of their agenda. But they had to contend with Morarji Desai who, as part of a compromise forced on the Congress by circumstances, had become deputy prime minister and finance minister in Indira Gandhi’s cabinet.

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