Sir James Braid Taylor assumes office as Governor. Jan First Reserve Bank notes issued. The Failure of the Travancore National and Quilon Bank, the largest bank in the Travancore region, underlined the need for comprehensive banking reform and legislation.
The silver rupee replaced by the quarternary alloy rupee. One Rupee note reintroduced. This note had the status of a rupee coin and represented the introduction of official fiat money in India. Sir C. Deshmukh assumes office of Governor. He may have been all that is rumoured. But he was very able, and in my experience mostly fair and judicious and patriotic.
I also found no particular ideological obsession with him He may have been drawn to leftists as friends and companions. But he understood the compulsions of the times and was too shrewd not to understand the weaknesses of individual leftists as well as rightists and was ready for practical compromises. If he disliked the Americans under Nixon and Kissinger, he had much reason to But on 9 September , Haksar asked Indira Gandhi to send this note to the cabinet secretary:.
I felt at that time that it was perhaps a little too early to do this. The Cabinet Secretary may take necessary steps.
There was some bureaucratic resistance but PNH would have none of it:. Dr IG Patel is 47 years old. Every self-respecting Government sends its high officers to UN Agencies on secondment and not for permanent absorption Hazari had shot into fame in the late s as the author of a deeply researched study on the functioning of the industrial licensing system in actual practice.
Hazari was young by RBI standards but commanded great respect. He would go on to spend six years at the RBI. Haksar fought quite a battle with the bureaucracy and succeeded in establishing a Department of Banking in the Ministry of Finance to take forward the objectives of bank nationalisation.
Ghosh himself was a key part of it and he recalled to me:. However, the idea was dropped on the persuasion of Vallabhbhai Patel and C. Similar action on others was demanded by the Socialist Party in and Jayaprakash Narayan in his point plan in , but only Imperial Bank was nationalized in into State Bank of India.
Some proposals were introduced in Parliament, but the then finance minister T. Krishnamachari, who believed the compensation payouts for nationalized banks could be used better in other parts of the economy, opposed the idea in Parliament.
Until the mids, saner and informed voices prevailed. After the deaths of Nehru and Lal Bahadur Shastri, renewed demands for nationalization gave Indira Gandhi the perfect political opportunity to strengthen her position. To set herself apart from the Congress Syndicate, which was moving away from socialism, Gandhi took a left turn to propose greater state presence in economic life.
Morarji Desai, who favoured greater regulatory control over banks instead of nationalization, was relieved of his duties as finance minister on 16 July Secret meetings led to a law conceptualized by her secretary P. Haksar, RBI governor L. Jha and chief economic adviser I. Patel, and drafted by S. It was promulgated as an ordinance to surprise the banks before V. Giri left office; but it violated constitutional and parliamentary norms, since Parliament was to reconvene in a mere two days.
The ordinance was taken to V. Giri, who was acting president since president Zakir Husain had died earlier that year. The day after signing the ordinance, Giri stepped down to become a candidate for the forthcoming presidential election, which that year was also tangentially related to bank nationalization.
Deshmukh, a former RBI governor who had argued against bank nationalization immediately after independence, was also contesting the election, this time supported by the Swatantra Party and Jan Sangh. Drafted in a mere matter of hours, the ordinance was presented to the cabinet at 5pm on 18 July and approved without discussion or opposition. Giri signed and promulgated it within a few more hours. Oddly, none of the banks challenged the ordinance in the courts.
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