In July 1969, Indira Gandhi took a decision that shook the old guard in the Congress, and left its mark on the economic history of Modern India. As Prime Minister, she nationalised 14 privately-owned banks, the first of many moves that had the emphatic stamp of Indira.
This move was preceded by an economic crisis that had hit India in the mid-1960s. There was a Balance of Payments crisis, a severe drought following the 1965 war against Pakistan, runaway inflation, severe food shortages, and depleted foreign exchange reserves.
The govt needed to ensure that money reached the weaker sections, the rural and agricultural sector, and small businesses. A section of Congressmen, including Chandraskehkhar, Mohan Dharia and K D Malaviya, thus led the demand for nationalization of banks.
This apart, Indira had bigger political reasons to nationalize banks. She had been battling the Congress old guard, who wanted to keep the status quo. She needed to shift the balance of power and felt that nationalisation of banks would give her the ammunition she needed.
Another push came when the old guard announced Neelam Sanjiva Reddy as the party’s nominee for the office of the President of India. It had fallen vacant with the death of Dr Zakir Hussain. If Reddy became President, Indira would be stymied every step of the way.
Anticipating the move to corner her, Indira’s Principal Secretary P N Haksar had prepared a ‘Note on Economic Policy and Programmes’, which called for the nationalisation of banks, among other issues. It was circulated at the Bengaluru session of the Congress.
But time was running out for Indira. The upcoming Parliament session was to open on 21st July, and Indira had to announce nationalisation via an Ordinance signed by the acting President. But V V Giri was to demit office on 20th July.
In what was virtually a stealth move, at 8.30 pm on 19th July, a Saturday, Indira went public on All India Radio, and announced the nationalisation of banks after V V Giri signed the Ordinance.
It was a move that positioned Indira Gandhi as a mass leader and transformed her into a left-of-centre champion of the downtrodden.
Cover Image: Times Now
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