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July 19 marks a milestone in Indian banking history. This day, half-a-century ago, the then Congress government headed by Indira Gandhi took the decision to nationalise 14 major scheduled commercial banks with deposits of over ₹50 crore. Eleven years later, six more banks were nationalised. Over the years, public sector banks have played a significant role in the development of the country. They have rapidly expanded their branch network, extended credit to crucial segments such as large industry, MSMEs, agriculture, trade and retail, and participated wholeheartedly in the government’s financial-inclusion efforts.
Today, there are 18 public sector banks (PSBs). Almost every household has a bank account. With the move towards digital payments and formalisation of savings, small finance banks are providing last-mile access to customers. Going forward, can public sector banks stand up to the private sector challenge? Will digitisation prove too big a disruptor? How do bank employees view the scenario? We take a detailed look.
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