Behind Bank Nationalisation

The architects of bank nationalisation - Indira Gandhi and PN Haksar. Pic credit Nehru Memorial

NK SINGH

Soon after the Indian Government nationalised 14 private banks on 19 July 1969, I interviewed CPI leader NK Krishnan for Frontier. Here are excerpts from the interview:

Seventyfive big business houses control the nation’s economy. The monopolists command the distribution of credit resources through their control over banks. Only three percent of the total shareholders are in possession of 49 percent shares in the banks.

A study of 20 leading banks reveals that only 118 persons served as directors on their boards. And these 118 held 1,452 directorships of industries numbering 1,100 all over the country.

According to NK Krishnan, a Communist economist whom I interviewed, monopolists use bank deposits to further their business interests through their control over banks. This monopoly led to neglect of medium and small scale industries and economically backward regions.

What have the banks done for the development of agriculture? Reserve Bank bulletins show that in the period 1951-65 investments of private sectors banks in the industrial sector increased from 31.5 percent to 61.5 percent. During the same period their investment in the agricultural sector came down from 2.2 percent to 2 percent.

Private sector banks concentrated their business in three States only – Maharashtra, West Bengal and Tamil Nadu. Rs 325 crore were channelized from other States to these three States. Thus, private sector banks were not giving much chance to economically backward regions like Bihar to develop.

Excerpts from Frontier, 16 August 1969

Frontier 16 August 1969

To read the PDF of the article, please click on the link below: