Home / Business and Economy / India Eyes Stronger Banks: Merger Plan Unveiled
India Eyes Stronger Banks: Merger Plan Unveiled
18 Jun
Summary
- 12 public sector banks may merge into five entities.
- Foreign investment limit in banks could increase to 49%.
- A new committee will chart reforms for 'Banking for Viksit Bharat'.
The Union finance ministry is considering forming a committee to consolidate 12 public sector banks (PSBs) into five. This move is intended to significantly enhance the operational efficiency and global competitiveness of India's banking sector. Discussions are underway, with a formal announcement on the committee's composition and terms of reference expected early next month.
This initiative, proposed in the FY27 Union budget as 'Banking for Viksit Bharat,' aims to align PSBs with India's growth phase. The committee may also recommend increasing the foreign direct investment (FDI) cap in PSBs from the current 20% to as high as 49%, a step designed to attract substantial global capital.
Historical precedent, including a successful merger wave between 2019-2020, shows the government's commitment to consolidation. Even with record profits and low NPAs in FY26, further consolidation is deemed necessary to create globally competitive institutions, as even the world's 100th largest bank holds over $300 billion in assets.
