Bank Nationalisation

Finance Minister Pranab Mukherjee is trying his best to change. It may be recalled that during his budget speech he praised the late Prime Minister Indira Gandhi's decision to nationalise about 40 banks, which he believes saved India from the global financial crisis. He has now reiterated his stand over the last weekend. As per a leading daily, he said, "We survived the economic meltdown because of this step. In the world's leading countries, the finance sectors have crashed but we are still surviving because we nationalised our banking sector."

In our opinion, the wise men at the Reserve Bank of India (RBI) and not Indira Gandhi should be given the credit for India escaping the financial meltdown. They made sure that the lending practices of Indian banks were not hijacked by fancy 'financial innovations'. The difference in praising the regulator and not the government through its presence in the banking sector is vital because India needs well regulated free enterprise and not the disaster that the license permit raj and mai-baap sarkaar was.

The above is an extract from the weekly mail I receive from Equitymaster. and the opinion expressed is that of Mr Ajit Dayal who writes the articles.
I fully agree with Mr. Dayal.
The credit should go to Mr Reddy, the previous Governor of the Reserve bank of India.
Mr P Chidambaram had tried his best to bulldoze Mr Reddy to loosen his purse but fortunately Mr. Reddy's sagacity prevailed.
Mr. Mukherjee is now trying to take indirect credit for the same as he was associated with Mrs Gandhi throughout.
Mrs. Gandhi did not nationalize the banks or discontinue the Privy purses of the erstwhile maharajahs from altruistic motives or to benefit the poor.
She did it to be one up on the "syndicate" consisting of Morarji Desai, Nijlingappa, S K Patil and Kamraj who were trying to remove her.
This vote winning strategy brought her a windfall and she won the elections.
Her action was similar to the one taken by V P Singh in initiating the OBC quota when he was floundered by Devilal's rally at the boat club and which resulted in the deaths of many students, both for and against the quota.
Both the above actions were motivated by self preservation and making a virtue of the necessity to survive.
I was in college at that time and had expressed my contrarian opinion to Mrs Gandhi.
Bank nationalisation only brought inefficiency and lethargy in the employees who were sure they could never lose their jobs and knew they could get away with whatever they wanted.
Their performance have improved only after the private banks started making their presence felt.