Nationalisation of Banks in India — 1969, 1980 and the Mergers

Bank nationalisation is one of those topics where exams ask the same four things every year — the year, the number of banks, the prime minister, and which bank came in which round. Then the merger questions arrived on top of it, and candidates who learnt the 1969 list years ago suddenly could not answer how many public sector banks exist today. This post puts both halves together: the 1969 and 1980 nationalisation lists, the mergers of 2017 to 2020, and the twelve public sector banks that remain, with their headquarters and founders.

1. Why nationalisation happened

Before 1969 the large commercial banks were privately owned and lent where returns were safest — big industry and trade in the cities. Agriculture, small industry and the rural districts received a small share of credit despite being where most people worked. Several private banks had also failed outright in the preceding decades, taking depositors' money with them.

The government's stated aim was to direct credit toward priority sectors and to spread branches into unbanked areas. Whatever one thinks of the outcome, the branch expansion is not in dispute — the number of bank branches in rural India multiplied many times over in the two decades that followed, and the priority sector lending framework dates from this period.

The legal route matters for exams. The 1969 action was taken by an ordinance, which the Supreme Court struck down in the R. C. Cooper case (1970) on the question of compensation. The government then re-enacted it through the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970. The 1980 round used a parallel Act of 1980.

One detail examiners like: Indira Gandhi was holding the finance portfolio herself at the time, after Morarji Desai left the ministry.

2. The 1969 round — the 14 banks

The cut-off was deposits of Rs 50 crore or more as on the qualifying date. Fourteen banks crossed it.

Six of these fourteen no longer exist as separate banks. That is exactly where recent questions come from — the paper gives a name from the 1969 list and asks what happened to it.

2. The 1980 round — six more banks

Eleven years later the government repeated the exercise with a higher threshold: deposits of Rs 200 crore or more. Six banks qualified.

The 1993 merger of New Bank of India into Punjab National Bank is a favourite question because of what it did to the arithmetic. Fourteen plus six is twenty, but after 1993 the number of nationalised banks is quoted as 19. If a question asks how many nationalised banks there were before the recent mergers, the answer expected is nineteen, not twenty.

3. State Bank of India — a separate story

SBI does not belong to either nationalisation list, and mixing it in is the most common error candidates make.

• The three Presidency Banks — Bengal, Bombay and Madras — were amalgamated into the Imperial Bank of India in 1921.
• Following the recommendation of the All India Rural Credit Survey Committee, the Imperial Bank was converted into the State Bank of India on 1 July 1955 under the SBI Act, 1955.
• The associate banks were brought in under a separate Act in 1959.
• On 1 April 2017 the remaining associate banks and Bharatiya Mahila Bank were merged into SBI itself.

The Reserve Bank of India is a third separate case. It began operations on 1 April 1935 under the RBI Act, 1934, and was nationalised on 1 January 1949. Its first Governor was Sir Osborne Smith and the first Indian Governor was C. D. Deshmukh.

4. The mergers of 2019 and 2020

The consolidation happened in two announced steps.

Effective 1 April 2019 — Dena Bank and Vijaya Bank were merged into Bank of Baroda. This was the first three-way merger of public sector banks in India.

Effective 1 April 2020 — four mergers took place together:

The stated purpose was scale — fewer, larger banks with stronger balance sheets and better technology spending capacity. The effect on the exam syllabus was immediate: the count of public sector banks fell from 27 in 2017 to 12.

5. The 12 public sector banks today — headquarters

Headquarters questions appear in almost every banking and SSC paper, and this short table now covers all of them.

Four founder names are worth carrying with the table because they are asked directly: Central Bank of India was founded by Sorabji Pochkhanawala, Canara Bank by Ammembal Subba Rao Pai, Bank of Baroda under Maharaja Sayajirao Gaekwad III, and UCO Bank by G. D. Birla.

6. Committees you should attach to this topic

Nationalisation questions often sit next to banking reform committee questions, so keep these together.

• Narasimham Committee (1991) — first report on banking sector reforms, recommending lower SLR and CRR, prudential norms and greater autonomy for banks.
• Narasimham Committee (1998) — second report, focused on capital adequacy, stronger banks and consolidation. The mergers of 2019 and 2020 are frequently traced back to this line of thinking.
• All India Rural Credit Survey Committee (Gorwala Committee) — its recommendation led to the creation of State Bank of India in 1955.
• Nachiket Mor Committee — on comprehensive financial services for small businesses and low income households, associated with the payments bank and small finance bank framework.

Since the number of public sector banks and their names have changed twice in recent years, verify any figure you plan to write in an exam against the current position, because older study material still carries the pre-2019 lists.

7. Previous year questions

1. How many banks were nationalised in 1969? — 14
2. What was the deposit criterion for the 1969 nationalisation? — Rs 50 crore or more
3. Who was the Prime Minister at the time of the 1969 bank nationalisation? — Indira Gandhi
4. In which year were six more banks nationalised? — 1980
5. Which bank merged with Punjab National Bank in 1993? — New Bank of India
6. Dena Bank and Vijaya Bank were merged into which bank? — Bank of Baroda
7. Syndicate Bank was merged into which bank? — Canara Bank
8. Allahabad Bank was merged into which bank? — Indian Bank
9. Andhra Bank and Corporation Bank were merged into which bank? — Union Bank of India
10. When was the Reserve Bank of India nationalised? — 1 January 1949
11. Imperial Bank of India was renamed as what, and in which year? — State Bank of India, 1955
12. Which is regarded as the first Indian-owned commercial bank? — Central Bank of India
13. Where is the headquarters of UCO Bank? — Kolkata
14. Which committee gave the reports on banking sector reforms in 1991 and 1998? — Narasimham Committee
15. Which bank from the 1980 list is still a separate public sector bank? — Punjab and Sind Bank

8. Frequently Asked Questions

Why is the number of nationalised banks given as 19 and not 20?

Because New Bank of India, nationalised in 1980, merged into Punjab National Bank in 1993. Fourteen from 1969 plus six from 1980 makes twenty on paper, but from 1993 onward the accepted figure in exam material is nineteen.

Is State Bank of India a nationalised bank?

Not in the 1969 or 1980 sense. SBI was created in 1955 by converting the Imperial Bank of India under a separate Act, following the recommendation of the All India Rural Credit Survey Committee. It is a public sector bank, but it does not appear on either nationalisation list.

How many public sector banks are there now?

Twelve, after the mergers that took effect on 1 April 2020 reduced the number from the earlier figure. Since this count has changed twice in recent years, confirm it against the current position before relying on older notes.

Which banks disappeared in the 2020 merger?

Oriental Bank of Commerce and United Bank of India went into Punjab National Bank, Syndicate Bank into Canara Bank, Andhra Bank and Corporation Bank into Union Bank of India, and Allahabad Bank into Indian Bank.

What is the difference between nationalisation and merger for this topic?

Nationalisation transferred ownership of private banks to the government in 1969 and 1980. The mergers of 2019 and 2020 combined banks that were already government-owned, reducing their number without changing who owned them.

For more Economy topics in simple language, see our Banking System in India and RBI and its Functions posts, or browse the Economy section. Preparing for a bank exam? Start with the IBPS PO guide or join the 100 Hour GS Course.