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  • Vinay Nair

In India, a Public-Sector Banking Crisis is brewing!

Updated: Aug 3, 2020

Indian banking sector was revolutionized in 1969, when former PM Indira Gandhi passed a resolution to nationalize 14 of the largest private sector banks in India. The Reserve Bank of India went on to say that this was the most important economic decision taken by the government since 1947.

The decision to nationalize banks was a result of political, social and economic factors prevailing in the country during that period.

Social Factors

The share of credit for agriculture sector was just about 2%.

Private sector banks in India were run by prominent industrialists and they provided loans to their own facilities. Indian banks were heavily criticized for not offering credit facilities to agriculturists, small and medium enterprises. Another reason for nationalising banks was to sync the banking sector with the goals of socialism adopted by the Indian government after independence.