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Why were Banks nationalised in India ? 1. To borrow money from USA

June 1, 2025 by rawan239

Why were Banks nationalised in India ?

1. To borrow money from USA
2. To follow the IMF guidelines
3. To provide the Government of India more control of credit delivery

Select the correct answer using the code given below:

1 only

2 and 3

3 only

1, 2 and 3

This question was previously asked in

UPSC Combined Section Officer – 2024

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The primary reason for nationalizing banks in India (initially in 1969 and further in 1980) was to align the banking sector with the socialist planning goals of the government. This included ensuring that credit flowed to priority sectors like agriculture and small-scale industries, expanding banking services to rural areas, and reducing the concentration of wealth in the hands of a few industrialist families who controlled private banks. Reason 3, “To provide the Government of India more control of credit delivery,” accurately reflects this key objective.

Nationalization aimed to make banking a tool for socio-economic development and planned economic growth by giving the government control over credit allocation.

Reasons 1 and 2 are incorrect. Bank nationalization was an internal policy decision driven by domestic economic and political considerations, not a means to borrow from the USA or to follow IMF guidelines. In fact, IMF prescriptions often lean towards privatization rather than nationalization.

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