The defendants allegedly used "unofficial" company credit cards for luxury purchases, unconnected with their duties as board members.
Prosecutors say about €12m (£10.4m; $13.5m) was spent on hotels, fine clothes, entertainment and travel.
Mr Rato denies wrongdoing. Bankia was rescued in 2012 at huge public expense.
The unofficial credit card purchases were not declared to the tax authorities. The system allegedly started at Caja Madrid bank and was continued by Mr Rato when Bankia was created in 2011.
How Spanish activists landed ex-IMF chief in court
A member of the governing centre-right Popular Party (PP), Mr Rato resigned as head of Bankia shortly before its near-collapse in 2012.
The government bailout of Bankia inflicted losses on 200,000 small investors, who held preferential shares in the bank.
Some of them voiced their anger outside the Madrid courthouse on Monday. "You wretches! Stealing money from pensioners!" they shouted at the accused as the trial got under way.
Prosecutors are seeking four-and-a-half years in jail for Mr Rato and six years for Miguel Blesa, the former president of Caja Madrid, a bank that was merged with six others in 2011 to create Bankia.
If found guilty, Mr Rato could also face a €2.7m fine, and Mr Blesa a fine of €9.3m.
Mr Rato headed the International Monetary Fund from 2004-2007. He also served as Spanish economy minister, and his fall from grace helped fuel accusations that the Popular Party was riddled with corruption.
Prosecutors say the lavish credit card purchases took place from 2003-2012 - some of them during Spain's financial crisis, when millions of citizens suffered hardship and unemployment soared.
Mr Rato's two successors at the top of the IMF have also been caught up in high-profile court cases.
French Socialist Dominique Strauss-Kahn took over from Mr Rato in 2007 but resigned in May 2011 to defend himself against charges of attempted rape in New York. Prosecutors dropped the charges later that year, then Mr Strauss-Kahn reached an out-of-court settlement with the hotel maid who accused him.
In a separate case last year, he was acquitted by a French court of the charge of "aggravated pimping" in connection with sex parties involving prostitutes.
Mr Strauss-Kahn's successor at the IMF, Christine Lagarde, is to go on trial in France in December over a state award of €285m in damages to tycoon Bernard Tapie when she was finance minister. She is accused of "negligence", but denies any misconduct.
Former IMF chief Rodrigo Rato and 64 other bankers have gone on trial in Madrid over an alleged credit card racket at Spain's troubled Bankia bank.