MONEY AND BANKING (Part – I)

Institution Year

3. Nationalization of RBI - 1949
2. Nationalization of SBI - 1955
4. Nationalization of LIC - 1956
1. Nationalization of 14 major banks - 1969

Hence, the correct chronological order is 3, 2, 4, 1.

The All-India Rural Credit Survey Committee, which is also known as A.D. Gorwala Committee had recommended to the establishment of State Bank of India through combining the Imperial Bank of India and some State's affiliated banks. The six commercial banks were nationalized on April 15, 1980 by the Government of India. Hence, both of the given statements are correct.

As per the question period, the total number of public sector banks in India (excluding SBI Group) was 20. To improve the condition of public sector banks, the Modi government adopted the process of merger in two different phases. In the first phase, five Associate Banks of SBI (and Bharatiya Mahila Bank) were merged with the country's largest public sector bank State Bank of India. Apart from this, Vijaya Bank and Dena Bank were merged with Bank of Baroda. In addition to this, subsequent to the enhancement of equity stake by LIC of India, the then public sector IDBI Bank was re-categorized as a private sector bank for regulatory purposes with effect from 21 January, 2019. In the second phase, 10 public sector banks were merged with effect from April 1, 2020. A total of six weak banks were merged into four big banks. Oriental Bank of Commerce and United Bank of India were merged with Punjab National Bank. Allahabad Bank was merged with Indian Bank. Syndicate Bank was merged with Canara Bank. Andhra Bank and Corporation Bank were merged with Union Bank of India.

At present, there are 12 public sector scheduled commercial banks (including State Bank of India) in the country.

List of Public Sector Banks

1. State Bank of India

2. Bank of Baroda

3. Bank of India

4. Bank of Maharashtra

5. Canara Bank

6. Central Bank of India

7. Indian Bank

8. Indian Overseas Bank

9. Punjab National Bank

10. Punjab & Sind Bank

11. Union Bank of India

12. UCO Bank

In the biggest consolidation exercise in the banking space, the government in August, 2019 had announced the amalgamation of 10 public sector banks into 4 bigger and stronger banks. This merger came into effect from April 1, 2020. After this, the total number of public sector banks (including SBI) is reduced to 12. The amalgamation of public sector banks has following significant benefits:

Economies of scale;

Improve access to capital;
Covering larger geographical areas;
Banks of global size;
Reducing operational risks;
Concentrated payment and greater settlement flows;
Better management of banking capital etc.

In the period between 2008-09 and 2016-17, Government of India infused cumulatively Rs. 1,18,724 crore in public sector banks. But yearwise capital infusion has not steadily increased in this period, there have been falls in between. Thus, statement 1 is incorrect.

Merger of five Associate Banks of SBI and Bharatiya Mahila Bank (BMB) in State Bank of India has been affected in 2017 to put the public sector banks in order. One of the desired objectives of consolidation of public sector banks is to improve their efficiency and streamlining of banking operations. Hence, statement
2 is correct.

EASE-Index' (Ease Banking Reforms Index) is a way to measure the performance of the public sector banks. The EASE (Enhanced Access and Service Excellence) is a no- table reform agenda for public sector banks that aims to strengthen banking.

A commercial bank is a kind of financial institution which carries all the operations related to deposits and withdrawal of money for the general public, providing loans for investment etc. Other functions of the commercial bank are purchase and sale of shares and securities on behalf of customers and acting as executors and trustees of wills.

In Public Sector Banks (PSBs), majority of stake (i.e. at least 51%) is held by the Government. State Bank of India, Indian Overseas Bank, Punjab National Bank etc. are public sector banks. At present, there are 12 public sector banks (including State Bank of India) in the country.

Among the given banks, Banks of Punjab was a private bank In 2005, Bank of Punjab and Centurion Bank have been merged to from Centurian Bank of Punjab.

ICICI (Industrial Credit and Investment Corporation of India) was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian Industry. The principal objective was to create a development financial institution for providing medium and long-term project financing to Indian business. ICICI bank was incorporated in 1994 as a part of the ICICI group. ICICI bank is a leading private sector bank in India. In 1999, ICICI become the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the New York Stock Exchange. Rest are nationalized Banks.