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Question

Explain briefly two reasons why all the important commercial banks in India were nationalised by the Government?

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Solution

  1. To reduce monopoly practices: Initially, a few leading industrial and "business houses" had close association with commercial banks. They exploited the bank resources to create their monopoly. Nationalisation of banks, thus, prevents the spread of the monopoly enterprise.
  2. To support the growth of agriculture sector: In a country like more than 70% of the population depends upon agriculture. Before nationalisation, private banks were not providing adequate loans to agriculture sector, thus for providing increased finance to agriculture banks had to be nationalised.

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