India Legal – July 13, 2019

of the party old guard (dubbed “syndicate”)

for rashtrapati.

What are some of your personal memories of the

events that followed?

On July 14, the Prime Minister’s Office notified

news agencies that Morarji Desai had been stri -

pped of his finance portfolio. I was then his In -

formation Officer, and went into his office. On

being shown this news flash, Desai sent in his res-

ignation letter, asked for his personal car and left

for his residence. From that moment up to July 19,

I was at his residence from morning till late into

the night. On July 19, in the afternoon, the prime

minister accepted Desai’s resignation from the

cabinet. Around 6 pm, Economic Affairs Secretary

Dr IG Patel gave me a copy of the ordinance

nationalising 14 private banks, but forbade me

from leaving the finance ministry until 8.45 pm

when Indira was expected to announce the bank

nationalisation over AIR.

Did you not find that unusual?

It was her masterstroke to go to the people for

support over the heads of party power brokers

who wanted her to be their “gungi gudiya” or

dumb puppet.

Was this pure power play and gimmickry? Were

there any justifiable, solid grounds for this sweep-

ing step?

Actually, until this nationalisation, a few business

houses in order to maintain their dominant posi-

tion, managed a cosy arrangement with commer-

cial banks and general insurance, since they were

also their owners. An RBI report on rural credit

had bared the stark reality of rural poverty and the

total neglect of agriculture and the rural sector by

private banks. Desai’s “social control” seems to

have not done anything to correct this situation.

Successive governments that claim to have

enhanced the flow of credit to farmers rarely

thank Indira for giving them this powerful politi-

cal tool.

Where was the empirical data to support

these assertions?

Interestingly, the officials chosen to work on

nationalisation could not even lay their hands on

any reliable official records for determining the

size of banks to be nationalised. They reportedly

took the cue from a newspaper (The Economic

Times) and a research article that divided banks

with `50 crore deposits and below.

Some top officials in the finance ministry

changed and a new banking department was

added to it for exercising broad policy oversight

over banks. The finance and other economic min-

istries under strict prime ministerial supervision

came with a series of policies whose traces are

present in most sectors of the Indian economy

even today. Many such policies for the broadening

of industrial base, entrepreneurship, advances in

agriculture and allied occupations, and measures

to change the face of rural India perhaps would

not have been possible without this single act of

bank nationalisation 50 years back.

Would you venture to say that the Modi govern-

ment has benefited from Indira’s initiative?

Banking in unbanked areas as well as the opening

of crores of zero balance accounts has become

possible because of this single move. Bank deposi-

tors in India have overwhelmingly voted for the

safety offered by public sector banks, even while

forgoing some of the blandishments offered by

their private competitors.

But does not this give the government undue

influence over the banking sector?

Whenever the subject of expansion of access to

banking, particularly in favour of underserved

areas, crops up, arguments are advanced for open-

ing up of the sector to private and international

banks. It is rarely noticed that even the nation-

Letter from the Editor

4 July 22, 2019

ILLUSTRIOUS

CAREER

S Narendra has

served as press

adviser to

several prime

ministers and was

Principal

Information

Officer. He also

served as

Information

Officer in the

finance ministry

under Indira

Gandhi