The day India's banks died because of political priorities of a populist PM

Indira Gandhi's brilliance as a politician lay in her ability to transform the most sordid political intrigue into high ideological disputation

Fifty years ago, India took a wrong turn leftward from which it is yet to recover: On July 19, 1969, the government took over the banking system, nationalizing 14 banks which together controlled 85% of bank deposits. Today, even after a quarter century of liberalization, state-controlled banks still control 70% of the sector’s assets. As a consequence, credit is weak, the private sector is stunted and India has to endure periodic banking crises and bailouts at taxpayer expense.

The legend around bank nationalization is this: Indira Gandhi, India’s prime minister at the time, felt that banks served the interests of