This was the real curtain raiser to the nationalization sprees in two doses in 1969 and in 1980 both by Madam Indira Gandhi. Some may prefer to call this paper as a catalyst to nationalization of banks in India.

This was hailed as a masterstroke of political sagacity by Jayaprakash Narayan, the national leader of high repute. It is a different story that the same JP Narayan had subsequently became bitter critic of Madam Indira Gandhi, for some other political reasons.

Why this story almost after 40 years There is a valid reason behind the recall of this topic. At the time of nationalization of banks in India, every one in the world called this step as a retrograde. Every self proclaimed modern economists of the world then, predicted that India would never ever progress in its journey towards progress as this has taken away the private entrepreneurship.

Every one including those modern economists were a witness to the massive transformation of modern India due to the nationalization of banks. This nationalisation became overnight the only tool to facilitate the development of Indian economy.

Orderly credit delivery was successfully achieved. It had paid rich dividends during the last four decades. The nationalized banks became the largest employer in the organized sector in India providing employment to a large number of educated unemployed. Bank branches were opened in the then neglected rural areas. Financial inclusion was attempted and succeeded even though it was not proclaimed.

Now let us look at the recent happenings in the international financial markets. Though the reasons for the melt down of the markets and the massive erosion of private wealth of investors are well known, the governments and regulators in the so called well developed countries of the world only now recognized that confidence has to be shored up in the financial system.

It has taken about forty years for the leading nations of the world to come to the realization that financial markets when left to the private sector totally will not always ensure the stability of the financial system and only the governments can provide much needed confidence, strength and support to the financial system in times of adversity.

The Indian leadership had recognized this much earlier. And they favored and decided in favor of nationalization of banks in India. This direct government ownership of banks in India only enabled the Indian financial system to escape from the recent global melt down. We owe our appreciation and deep sense of gratitude to the fortitude and vision of Madam Indira Gandhi.

Well. Recognizing this, let us hope and pray that the present and subsequent governments in India will not attempt and go in for total privatization of the nationalized banks in India.

This stray thought on this topic occurred to me while going through the following Bloomberg coverage today on Us Treasury said to invest in nine major US banks – The Bush administration will invest about $125 in nine of the biggest US banks including Citigroup Inc and Goldman Sachs Group Inc in the governments latest attempt to shore up confidence in the financial system. Similar moves are also attempted by European governments.

Hats off to you Madam Indira Gandhi. Indian banking and financial system are safe, solid and strong thanks to your brave attempt on nationalisation of banks.