Dhar writes in his memoirs that V. Krishna Menon made the startling claim in a private meeting with top officials before nationalization that the government would not have to worry about mobilizing funds once banks were nationalized.
Banks were asked to push funds towards sectors that the government wanted to target for growth. This was part of the overall political strategy to squeeze big business houses that backed her opponents, as well as build a new political base.
Credit planning also meant that the interest rate structure became incredibly complex. There were different rates of interest for different types of loans. The Indian central bank eventually ended up managing hundreds of interest rates. This mind- boggling structure was brought down only after the reforms, with the central bank managing the pivotal repo rate, while commercial lending rates were to be decided by banks themselves. The subsequent political economy was perverse.
While we must strengthen the machinery at the Centre, there will be autonomy for each bank and the boards will have well-defined powers. We will give directions but these will be on policy and general issues, not on specific loans to specific parties. We shall be vigilant about the dangers of too much interference—whether it is motivated by political or other considerations. There are no prizes for guessing how long that promise held.
The legendary R. Talwar would resign as chairman of State Bank of India in rather than bend under political pressure. The political control of bank lending continued even after the reforms—and the bad loan mess that has weighed down on the Indian economy since is at least partly explained by the credit bubble that grew under political patronage from New Delhi. The fact that successive governments continue to maintain a tight grip on the banking sector shows the political importance of having control over the credit spigots in the economy.
Bank nationalization was the pivot of a broader political economy strategy followed in the s—a decade when economic growth barely outpaced population growth. Average incomes stagnated. It was a lost decade for India. There is no doubt that exogenous shocks, such as rising energy prices or failed monsoons, played a part in the stagnation, but economic policy also hurt.
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GST officers unearth Rs 34 crore input tax credit fraud. Taxpayers can now access new I-T annual info statement on e-filing portal. Bank Ltd. Select State. Select City. Select Branch. Switch to Hindi Edition. It was Bakshi who had given the seal of approval to Ghosh and had joined the duo late that night of 17 July for confabulations. The next day, Ghosh writes, the prime minister herself summoned him in the morning. She wanted to be convinced that the legislative draft for nationalisation of banks could actually be prepared in less than 24 hours.
When she was told that such a draft had, in fact, existed from the end of when nationalisation of five banks had first been considered, she appeared to relax and swore Ghosh to absolute secrecy saying that in case of any hitch he should apprise PNH. For the next few hours, Haksar, Bakshi, Ghosh and a few others who had been specially commandeered for this purpose, like RK Seshadri an RBI official and Niren De attorney general slogged to prepare the ordinance — which was an executive order that would have to be ratified by Parliament later.
This was one speech of hers which had not been written or even worked upon by Haksar. In his memoirs, Patel takes some pride — and rightly so — in the authorship of this landmark speech of Indira Gandhi:. I drafted the Cabinet paper and the speech for Mrs Gandhi Not a word I wrote was changed by Haksar or Mrs Gandhi next morning He may have been all that is rumoured. But he was very able, and in my experience mostly fair and judicious and patriotic. I also found no particular ideological obsession with him He may have been drawn to leftists as friends and companions.
But he understood the compulsions of the times and was too shrewd not to understand the weaknesses of individual leftists as well as rightists and was ready for practical compromises. If he disliked the Americans under Nixon and Kissinger, he had much reason to But on 9 September , Haksar asked Indira Gandhi to send this note to the cabinet secretary:.
I felt at that time that it was perhaps a little too early to do this.
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