Post-independence, India saw a surge in banking institutions designed to fulfill citizen's economic goals. These banks manage funds, secure assets, offer deposit interest, and provide critical financial support to individuals and businesses, significantly influencing economic dynamics.

An important milestone in Indian banking was on July 19, 1969, when Prime Minister Indira Gandhi nationalized 14 commercial banks with deposits over Rs. 50 crores. This pivotal move transformed the banking industry, impacting the economy deeply. Currently, India has 12 state-run public sector banks.

Understanding Government Banks

Government banks or public sector banks (PSBs) are financial entities where the Indian government holds over 51% of the shares. Although not directly controlled by the government, they are major stakeholders. Presently, India comprises 12 government-owned banks:

• Bank of Baroda
• Bank of India
• Bank of Maharashtra
• Canara Bank
• Central Bank of India
• Indian Bank
• Indian Overseas Bank
• Punjab & Sind Bank
• Punjan National Bank
• State Bank of India
• UCO Bank
• Union Bank of India

A Glimpse into Nationalised Banks’ History

Bank of Baroda (BOB): Founded in 1908 in Vadodara, BOB was nationalized in 1969, augmenting its influence via mergers.

Bank of India (BOI): Established in 1906, Mumbai, BOI became government-owned in 1969 with vast local and global branches.

Bank of Maharashtra: Founded in 1935 in Pune, nationalized in 1969, it's crucial in aiding small businesses in Maharashtra.

Canara Bank: Initiated in 1906, Mangalore, and nationalized in 1969, recently merged with Syndicate Bank.

Central Bank of India (CBI): Established in 1911, Mumbai, a first in Indian management, grew nationally and globally post-nationalization in 1969.

Indian Bank: Since 1907, headquartered in Chennai, merged with Allahabad Bank in 2020, ranking as India's seventh-largest PSB.

Indian Overseas Bank (IOB): Launched in 1937, Chennai, with commendable international reach, nationalized in 1969.

Punjan & Sind Bank: Founded in 1908, New Delhi, nationalized in 1980, vital in Punjab.

Punjab National Bank (PNB): Since 1894, New Delhi, merged with Oriental Bank of Commerce and United Bank of India in 2020.

State Bank of India (SBI): India’s largest public bank, nationalized in 1955, with extensive growth globally.

UCO Bank: Created in 1943 in Kolkata, robust in volume and international dealings, nationalized in 1969.

Union Bank of India: Initiated in 1919, Mumbai, grew significantly after merging with Andhra Bank and Corporation Bank in 2020.

Motivations for Bank Nationalization in India

• Financial Inclusion: Banks reached underserved areas for inclusive growth.
• Growth Promotion: Directed credit to vital sectors like agriculture.
• Reduced Cronyism: Ensured fair resource distribution, mitigating undue influence.
• Prudent Financial Practices: Enhanced oversight to manage lending efficiently.

Pros of Public Sector Banks (PSBs)

• Attractive deposit interest rates.
• Affordable credit options.
• Broad service reach, especially rural.
• Vast branch network.
• Employment and pension benefits.

Cons of Public Sector Banks (PSBs)

• Service issues and corruption.
• High default rates.
• Slow decision-making processes.
• Limited personalized service.

Exploring Payment Banks

Payment Banks, regulated by the RBI, promote digital transactions but cannot provide credit or loans. They can handle deposits up to Rs.200,000 per customer.

Notable Payment Banks in India include:

• Airtel Payment Bank
• AU Small Finance Bank
• Equitas Small Finance Bank
• ESAF Small Finance Bank
• Fincare Small Finance Bank
• Fino Payments Bank
• India Post Payment Bank
• Jana Small Finance Bank
• NSDL Payment Bank
• Paytm Payment Bank
• Suryoday Small Finance Bank Ltd.
• Ujjivan Small Finance Bank

[RBI]: Reserve Bank of India