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Nationalized Banks In India Research Team | Posted On Friday, November 16,2018, 04:40 PM

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Nationalized Banks In India



Nationalization is an act of taking an industry or an asset into public ownership of a national government. Nationalization refers to private asset being transferred to the public sector to be operated by or owned by the state. Nationalization takes place when the government takes control over the assets of a corporation usually by acquiring the majority stake. Nationalization of banks has contributed in a big way to the economy.

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Nationalized Banks In India

Functions of nationalized banks:

Banks perform several important functions. The functions provide the base to the whole operation of the banking system. They are as follows:

  • Accepting deposits
  • Transfer Money from one branch to another
  • Collecting money from the bills of exchange.
  • Purchasing and selling shares and debentures.
  • Receiving periodic collection of salary, pension and dividend.
  • Acts as Trustee and executor
  • Collection of cheque ,dividends, interest
  • Accepts Payment of rent, insurance, premiums
  • Dealing in foreign exchange
  • Help to maintain the flow of money in an economy
  • It provides safety not only for money but also for wealth
  • Issues cheque and letter of credit
  • Gives Information relating to economic position
  • Provides Consultant services like Financial Advisor
  • Offers different types of  Loans
  • Provides Personal Credit
  • Manages trade
  • Helps in rural development
  • Manages accounts and provides locker service
  • Extends the facility of Electronic Banking

List of Nationalized Banks in India and Their Head offices:

The list of nationalized banks is as follows:

Serial number

Names of the nationalized banks

Head offices





Andhra bank



Allahabad bank



Bank of Baroda



Bank of India



Bank of Maharashtra

Pune, Maharashtra


Canara bank



Central bank of India



Dena bank



Corporation bank



Indian bank



Indian overseas bank



Oriental bank of commerce

New delhi


Punjab and Sind bank

New Delhi


Punjab national bank

New Delhi


Syndicate bank

Manipal, Karnataka


UCO bank



Union bank of India



United bank of India



Vijaya bank



Why were these banks nationalized?

Before nationalization, the majority of the banks were private banks. Private Banks were class based and there would be monopolies that would only benefit fewer people (richer people) in society. With the nationalization of the banks, the credit scenario changes benefitting all sections of society and contributes to overall prosperity. The Indian Government recognised the need to bring the banks under some form of government control to be able to finance India’s growing financial needs. In 1949 the RBI became the first bank to be nationalized.

Objectives of Nationalized Banks in India:

Some of the main objectives of nationalized banks are discussed below:

  • Social welfare: the banks were focused towards the development and expansion of small and medium industries and the agricultural sector. These banks provide the necessary funds for their expansion and growth.
  • Controlling private monopolies: before nationalization the banks were controlled and operated by corporate families. In order to ensure smooth supply of credit and cease private monopolies, the government took over the banks for the betterment of the nation.
  • Expansion of banking: these banks expanded the banking base to previously un-banked areas. 
  • Reducing regional imbalance: the nationalized banks were introduced in areas where banking facilities were not available in order to reduce regional imbalances.
  • Developing banking habits: For the progress of the country and economic development, it is necessary to develop the banking habit among a large population.
  • Private sector lending: The agricultural sector was deprived of their due share in credit. This crisis leads them to borrow money from private lenders at very high interest rates. Nationalization was a must for making the funds available to that sector.

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Advantages of nationalization of banks in India:

The advantages of nationalization of banks are discussed below:

  • It would enable the government to obtain all the large profits of the banks as revenue.
  •  Nationalization would safeguard interests of the public and increase their confidence thereby bringing about a rapid increase in deposits.
  •  It would remove the concentration of economic power in the hands of a few industrialists.
  • It would help in stabilizing the price levels by eliminating scarcity of essential goods.
  • It would enable the banking sector diversify resources for the benefit of the priority sector.
  •  Eliminates wasteful competition and raises the efficiency of the working of banks.
  • Enables rapid increase in the number of banking offices in rural and semi-urban areas and helped considerably in deposit mobilization to a large extent
  • Necessary for the furtherance of socialism and in the interest of communities.
  • Enables the Reserve Bank to implement its monetary policy more effectively.
  • It would replace the profit motive with service motive.
  • It would secure standardization of banking services in the country
  • Would check the incidences of tax evasion and black money
  • Through public ownership and control, banks function like other public utility services by catering to the financial need of the common man.
  • Like other countries, India should also get profit by nationalizing her banking industry.
  • Essential for successful planning and all-round progress of the national economy, community development and for the welfare of the people.

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Disadvantages of nationalization of banks:

The disadvantages of nationalization of banks are as follows:

  • Political purpose rather than for Productive purpose: The government has acquired strength over the financial services and there is the danger of using the financial resources for political pur­poses rather than for productive purpose.
  • Scope for inefficiency: Some are of the opinion that after nationalization, banks will degenerate to the level of agricultural co-operatives, which are known for their inefficiency and corrupt practices.
  • Less attractive customer's service: Inefficiency, indeci­sion, corruption, and lack of responsibility are the evils with which the government under­takings are suffering. A government bank may not care to attach importance to the cus­tomer service.
  • Branch expansion: To argue that nationalization will help to facilitate branch expan­sion in rural areas much more rapidly than the private banks cannot be supported by facts. Whether it’s a private bank or nationalized bank; it has to go by business principles and satisfy that the new branch is economically viable. In other words, branch expansion can be achieved by private banks as well, without nationalization.

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