From 1947 to 1955, 360 small banks got choked to death in loss, which led to the drowning of crores of rupees of common people. On the other hand, some banks were investing money in the business of black marketing and hoarding. Therefore, the government decided to take the banks’ command in their hands so that it could also use that money for social development.
In 1967, Indira Gandhi introduced certain provisions in the Congress party in this regard. The government’s control over the banks, the financial benefits to former prices and the fixation of minimum wages were her main points. But the Congress party did not show any special interest on Indira’s offer.
This annoyed her, leading the Syndicate and herself in the mood for a war of words.
Gandhi was advised by her officers (PN Haksar, Kaw etc.) that in order to win in this war of words with the Syndicate, she would have to give it an ideological design. For this, Indira proposed the nationalisation of banks with immediate effect at the AICC Bangalore session that year. The message went to the people that Indira is a warrior fighting for the rights of the poor. So, the fielding was set but there was still a problem.
Morarji Desai, the then Finance Minister and whom Indira used to fear, was coming in the way. Though, Desai was in favour of government control over banks from a social point of view, he was not in favour of their nationalisation.
The team of ‘five Pandavas’ run by PN Haksar made a plan to remove Desai from Indira’s path. For this, Chandrashekhar and other young generation Congress leaders accused Desai and his son Kanti Desai of financial irregularities and benefiting some big industrial houses.
By taking advantage of the heat of the moment, Indira ordered Desai to change his portfolio. As Desai did not want to part with his position of the ‘Finance Minister of India’, he didn’t agree to this and eventually resigned.
Now, the way was clear for Indira. On July 19, 1969, by issuing an ordinance, the government nationalised 14 large private banks in the country. The ordinance through which this was done was called the ‘Banking Companies Ordinance‘. Later, a Bill with the same name was also passed and later became a law. This was the first in-house victory of Indira Gandhi who was till then regarded as the गूंगी गुड़िया of Congress Syndicate.
Later, this very thing escalated manifolds. It led to the suspension of Indira from the Congress party, which further led to a split of Congress into Congress-R (the new one, of which Indira Gandhi was a part) and Congress-O (the original party). Later, Congress-O ceased to exist.
References
India After Gandhi by RC Guha
Barons of Banking by Bakhtiar Dadabhoy
Beyond the Lines by Kuldeep Nair