When the Reserve Bank of India entertains applications for the third round of private entry into banking, marks the beginning of one more phase in banking liberalisation in India. Central to that liberalisation was the reversal of the post-1969 policy in which banking was made a largely public preserve by the nationalisation of the major private banks. Till then, India’s major banks, other than the State Bank of India and its subsidiaries, were directly or indirectly controlled by big business, resulting in the capture of a dominant share of the nation’s savings by large firms to the exclusion of small borrowers and the agricultural sector. Seizing the ownership of these banks and bringing them into the public sector established social control. Some private banks remained, but they were small domestic ones or foreign players with restricted operations. In the two decades that followed, India’s banking sector, judged by behaviour or social performance indicators, went through a dramatic transformation.
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