Know More About Nationalized Banks in India

All of us are aware that in today’s fast – moving world, people can safely park their hard – earned money in banks and other financial institutions without worrying much about the safety of these invested funds.

Most of us are also reaping the maximum benefits of the banking schemes which are available presently in the nation.

These are the schemes which are forefathers were unheard of.

This was because, in the early years there was a lack of proper mechanism for people to safeguard their money and mostly all the individuals used to store and treasure their money in their homes.

On the 1st of April 2020, Finance Minister Nirmala Sitharaman announced the merger of 10 banks into 4.

This was done to stipulate the economic growth and reform the banking sector in India.

With effect of this massive amalgamation, the total number of the PSBs, popularly known as the Public Service Banks have reduced to 27 (2017) to 12 (2020).

Currently, there are twelve public sector banks in our country. All the banking operations in India are managed by the RBI, which is a central authority.

What is a Bank?

A financial institution that has been licensed for lending the loans to the needful and receiving the deposits.

Other than the mentioned, a bank performs many different functions such as safety deposit boxes, financial services, wealth management, currency exchange, etc.

However, the main function of a bank still remains lending money to different individuals and businesses and receiving deposits.

This process involves investing the fund securities, safeguarding payments, and disbursing them.

Categorization of Banking Sector

The banking sector is mainly characterized into 2 broad categories – namely, non – scheduled banks and scheduled banks.

The schedules banks are established and its operations are defined under the 2nd schedule of the RBI Act of 1934.

If we further categorize these banks, these banks can be divided into 5 main broad categories, which are –

  • Private Sector Banks
  • State Bank of India i.e. SBI and its associates
  • Regional Rural Banks
  • Foreign Banks
  • Nationalized Banks

What do you infer by Nationalized Banks?

When the public sector assets are owned or operated by the central or the state governments, then it is known as Nationalization.

The banks which were formerly operating under private sector were transferred to the public sector in our country.

This was done by the act of nationalization, and it was then that the nationalized banks came into existence.

The history of the banking sector in our country states that the GOI i.e. the Government of India initiated several different measures to play an important role in the economic development of India, after Independence.

This step led to the establishment of the RBI i.e. the Reserve Bank of India in the April of 1935.

Later, it was too nationalized during the year 1949 under the terms of RBI i.e. the Reserve Bank of India Act 1948.

The Government of India adopted a well – planned economic development for the betterment of India after independence.

The GOI i.e. the Government of India under the leadership of former honorable Prime Minister of India Smt. Indira Gandhi issued an ordinance.

This was done to nationalize fourteen largest commercial banks of the country.

This was done with effect from 19th of July, 1969 under the regulatory authority of the RBI.

You will be surprised to know that at the time of nationalization of these banks, these banks constitute up to approximately 85 per cent of the country’s deposits, and most of these were owned privately.

During the year of 1980, six more commercial banks followed the same suit and came under the same cover of nationalization.

However, the topic was in the light of the debate for a long period of time because till the 1990s, the growth of these nationalized banks grew at a snail’s pace of approximately 4 per cent annually.

Therefore, to address the problem stated above, the government of India adopted the liberalization policy during the early 1990s.

They licensed a very small no. of private banks in India that greatly helped for the rapid growth boom for the economic conditions of our country.

Reasons for the Nationalization of Banks in our country

  • For prioritizing the lending of the sector
  • For reducing the imbalance in the sector
  • For controlling the monopolies of the private sector
  • For expansion of the banking sector
  • For developing the habits of banking services
  • For social welfare

How many Nationalized Banks in India?

Public Sector Bank, or PSB is a bank which is either owned by the government or the government is the biggest shareholder of over fifty – one per cent in the bank.

Fun Fact – Under the SBI Act of 1955, SBI i.e. the State Bank of India became the 1st nationalized bank in our country.

As already stated, the Reserve Bank of India i.e. the RBI regulates the banking sector in the country.

The merger has been done with the aim of increasing the efficiency and productivity of the banks.

Alongside, the economy will be boosted as the number of NPAs and bad loans will be reduced.

The twelve public sector banks are –

1 Punjab National Bank

Headquarters – New Delhi

Tag Line –The Name you can surely bank upon

2 Indian Bank

Headquarters – Chennai

Tag Line – Your Tech – Friendly Bank

3 State Bank of India

Headquarters – Mumbai

Tag Line – The Nation’s Bank on Us

4 Canara Bank

Headquarters – Bangalore

Tag Line – Together we can

5 Indian Overseas Bank

Headquarters – Chennai

Tag Line – Good people to grow with

6 Union Bank of India

Headquarters – Mumbai

Tag Line – Good people to bank with

7 UCO Bank

Headquarters – Kolkata

Tag Line – Honors your Trust

8 Bank of Maharashtra

Headquarters – Pune

Tag Line – 1 Family, 1 Bank

9 Punjab and Sind Bank

Headquarters – Rajendra Place, New Delhi

Tag Line – Where Service is a way of Life

10 Bank of India

Headquarters – Mumbai

Tag Line – Relationships beyond banking

11 Central Bank of India

Headquarters – Mumbai

Tag Line – Build a better life around us

12 Bank of Baroda

Headquarters – Gujarat

Tag Line – India’s International Bank

Now, let’s discuss each of the banks one by one in detail.

1 Punjab National Bank

Punjab National Bank, also known as PNB was set up to help the Indian people.

It was the 1st Swadeshi Bank which is known to began its operations on 12th of April, 1895. It had the working capital of Rs. 20000 and the authorized capital of Rs. 2 lakhs.

2 Indian Bank

Along with the Swadeshi movement, a bank known as Indian Bank was born on 15th of August 1907.

It has all – India presence with as many as 9786 touch points. This included 3022 BCs + 3892 BNAs or ATMs + 2872 Domestic Branches.

3 State Bank of India

State Bank of India, which is popularly known as SBI has a history of more than 200 years.

It is by far the largest commercial bank of our nation.

It is also the largest bank of our nation in terms of employees, customers, branches, profits, deposits, and assets.

You will be surprised to know but the Government of India has over fifty per cent stake in State Bank of India i.e. the SBI.

It was formed when 3 banks – namely, the Bank of Madras, Bank of Calcutta, and the Bank of Bombay merged with each other.

It gave rise to the Imperial Bank of India. It was on 1st July, 1955 that the Imperial Bank of India was renamed as the State Bank of India.

It was when the GOI i.e. the Government of India acquired around 60 per cent of the stake in the Imperial Bank of India.

As already mentioned, the State Bank of India is by far the largest and the greatest bank if we determine or segregate by any factor.

It holds twenty – three per cent of the assets and a total of twenty – five per cent of the total deposits and loans markets.

Many people doesn’t think of the State Bank of India as a nationalized banks as its inception, it has been always a state – owned financial institution.

The SBI’s Net Sales Turnover stood at Rs. 2.2 lakh crore rupees for March 2018 against Rs. 1.75 lakh crore rupees during 2017 March, thus increasing by a significant twenty – three per cent.

4 Canara Bank

What we know as ‘Canara Bank‘ today was founded as ‘Canara Bank Hindu Permanent Fund’ in the year 1906.

It’s foundation was laid by the famous philanthropist of his times, Shri Ammembal Subba Rao Pai.

It was in the year 1910 that this small seed blossomed into a LMTD. Company which came to known as ‘Canara Bank Ltd.’.

After nationalization in the year 1969, it became the Canara Bank that we know today.

Canara Bank is one of the oldest PSBs i.e. Public Sector Banks in the nation.

Across several locations in our country, this bank has a chain of 10600 ATMs and 6639 branches.

As early as 1976 marks the year when the Canara Bank established an international division abroad for the very 1st time.

If we talk about the present conditions, the bank has its branches located and placed in many different locations in the world such as Moscow, Tanzania, Bahrain, Hong Kong, Shanghai, London, Doha, New York, Dubai, and South Africa.

During the fiscal year of 2018, the net worth of this bank was recorded at Rs. 5.24 lakh crore rupees against Rs. 4.95 lakh crores during the fiscal year of 2017, registering an increase of 5.97 per cent.

5 Union Bank of India

Union Bank of India was established in the year 1919, on the 11th of November.

The Union Bank of India now operates through more than 4200 + branches all over the country.

One quality that distinguishes this bank from the rest of the Public Sector Banks is that the Union Bank of India has shown uninterrupted profit during all the years of its operations.

This has been possible as the core values of this bank i.e. prudent management without ignoring opportunities has been followed all these years.

6 Indian Overseas Bank

Shri M.Ct.M Chidambaram Chettyar, who happens to be a pioneer in different fields, was the founding father of the Indian Overseas Bank.

He laid the foundation of this bank on the 10th of February 1937.

His main aim was to take the Indian Overseas Bank across the globe by specializing in the foreign exchange business in the banking sector.

7 UCO Bank

UCO Bank was founded in the year 1943 and is an advertisement bank.

It was a GOI i.e. the Government of India endeavour.

Its Board of administrators consists of depository financial institution of India and the state representatives from the Government of India.

It also includes professionals such as businessmen, economists, management consultants, and accountants, etc.

8 Bank of Maharashtra 

Maharashtra has always been a very progressive region of our nation.

We are stating this because the banking activity was started in this region quite early as compared to other regions in the country.

Traditionally speaking, this bank was established in the year 1840. It was primarily a depository financial type of institution in the geographic area.

However, there were formerly 2 depository financial institutions present –

  1. The Poona Bank in Pune which was established in the year 1889.
  2. It was followed by the establishment of the Deccan Bank in the year 1890.

Here’s an important information for all you folks and people who are prepping for government exams.

Q. Do you know which is the largest bank in India in terms of the number of branches all across the nation?

A. Yes, you got it right, mate – It  is none other than the Bank of Maharashtra.

As per the official figures, the Bank of Maharashtra has an estimated fifteen million customers worldwide.

D.K. Sathe and V.G. Kale laid the foundation of this bank in the year of 1935.

It was during the year of 1944 that this bank gained the status of a Scheduled Bank.

In the year 1998, the Bank of Maharashtra gained the autonomous status that helped in the reduction of the interference of the government’s bureaucracy in its decision – making process and the internal matters.

9 Punjab and Sind Bank

Punjab and Sind Bank was born with the idea for the upliftment of the poorest of the poor situated in the land.

Punjab and Sind Bank was established in the year 1908. Sardar Tarlochan Singh, Sir Sunder Singh Majitha and Bhai J Vir Singh planted the idea of the Punjab and Sind Bank.

This bank was established with the sole idea to help the weakest section of the society.

It was done to raise their standard of life by increasing their economic endeavours.

10 Bank of India

Eminent businessmen from Bombay (Now, Mumbai) established the Bank of India on the 7th of September, 1906.

Until July 1969, the Bank of India was beneath public management and possession.

The Bank of India rise over the year and blossomed into a very big establishment with sizable international operations and a robust national presence.

You will be surprised to know that this bank only had 50 workers and a paid capital of only Rs. 50 hundred thousand in the beginning, when it started its operations.

As of January 2017, the Bank of India had a total of 5100 branches all across the nation.

The headquarters of the Bank of India are located in Nariman Point, in Mumbai. 

11 Central Bank of India

Central Bank of India was established in the year 1911.

It was one of the 1st financial organizations of the country which was wholly managed and held by the responsible and educated citizens of our nation.

Sir Sorabji Pochkhanawala was the founding father of the Central Bank of India.

This bank was his dream and Sir Pherozesha Mehta was the primary chairman of the Central Bank of India.

12 Bank of Baroda

Bank of Baroda, which is a money services company and Indian state – owned international banking company is headquartered in the city of Vadodara in the state of Gujarat.

The city was formerly known as Baroda, thus the name of this bank i.e. The Bank of Baroda.

This bank was founded by the Prince of Baroda. His name was Prince Sayajirao Gaekwad III in the 20th Gregorian calendar month of the year 1908.

Therefore, this bank was founded during the era of pre – independence.

The Bank of Baroda is the 2nd – largest Indian bank if we talk about assets as the total assets of the bank are approximately Rs. 3.58 trillion rupees.

The corporate office of the Bank of Baroda is in Mumbai i.e. the financial capital of the nation.

Big Bank Mergers : Merger of ten Public Sector Banks (PSBs) into four

On 30th of August, 2019; the Government of India announced big bank mergers that took the nation by a big surprise.

This massive step was taken to improve the condition of a sector that is struggling with the clean-up of bad loans and NPAs, and create lenders of big scales in the world who can support the dipping economy of the country.

You might be aware that the Government of India and the honorable Prime Minister of India aspires to surge to 5 trillion dollars by the fiscal year of 2024.

Following the same policy, ten state – owned banks have been consolidated to four PSBs i.e. the Public Sector Banks.

This will help in the easy and quick realisation of the gains of the banks that are based on the use of the same Core Banking Solution (CBS) platform used in the bank.

The Honorable Finance Minister of the country, Smt. Nirmala Sitharaman stated that the government of India wants to create next – gen banks.

She said that the  country and the consumers need big banks that has enhanced capacity for increasing credit.

The country and the banking customers of the nation need banks with a strong global reach and national presence as well.

The Finance Minister also stressed upon the fact that it has been proposed that there will be 0 downsizing in the number of employees during and after the merger of these banks.

With this merger scheme, the total number of twenty – seven nationalized banks will be reduced to twelve PSU entities in the banking sector, post – merger.

The banks which are under the amalgamation according to the scheme of merger are –

United Bank, Oriental Bank of Commerce, and the Punjab National Bank

If we talk about this case, then Punjab National Bank, also known as PNB will be the anchor bank.

This amalgamation will be the 2nd – largest public sector bank (PSB) followed by the State Bank of India.

This merger will have a branching network of 11437 branches and a total business of Rs. 17.95 lakh crores rupees.

Syndicate Bank and Canara Bank

Both these banks are from South India and these will be merged with Canara bank being the anchor bank.

This will be the 4th – largest public sector bank (PSB) with a total business of Rs. 15.20 lakh crores rupees.

When these banks will be merged, the total combined network in these bank’s network will be of 10342 branches.

Corporation Bank, Andhra Bank and the Union Bank of India

This will be the 5th – largest public sector bank (PSB). The Union Bank of India will be the anchor bank in this case of merger.

The total consolidated business will be of Rs. 14.59 lakh crore rupees and the number of branches all over the nation will be 9609.

Allahabad Bank and Indian Bank

Allahabad Bank will be merged with the Indian Bank and the latter will be the anchor bank in this case of the merger of banks.

It will the 7th – largest public sector bank (PSB) after amalgamation.

Both these banks have a strong presence in Eastern, North, and Southern parts of our country; and the total consolidated business size of these banks will be Rs. 8.08 lakh crores rupees.

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