India Plans Fresh Round of Bank Mergers: Sitharaman Signals Mega Consolidation
- Work on next bank merger round begins
- Talks underway with RBI and banks
- Last merger: 10 PSBs combined into 4 (2019–20)
- Goal: Build globally competitive, large-scale lenders
New Delhi: Union Finance Minister Nirmala Sitharaman on Thursday confirmed that the government has begun work on the next phase of public sector bank consolidation, asserting that India now needs “a lot of big, world-class banks” to match its economic ambitions.
Speaking at an event organised by CNBC-TV18, Sitharaman said discussions are underway with the Reserve Bank of India (RBI) and top bank executives to chalk out a plan for the next round of mergers and institutional restructuring.
MEGA EXCLUSIVE
Finance Ministrer @nsitharamanoffc tells @ShereenBhan ”WORK IS UNDERWAY on PSU Bank Consolidation, adds:
– India Needs A Lot Of Big Banks
– Discussing Banks’ Consolidation With RBI#SBIConclave2025 #SBI #NirmalaSitharaman pic.twitter.com/bV2VuTcauu— CNBC-TV18 (@CNBCTV18News) November 6, 2025
“Work has commenced. We are in talks with the RBI and banks. This is not just about amalgamation — we are looking to create an environment where banks can operate efficiently and grow,” she said.
The fresh push for consolidation follows the last major exercise carried out in 2019–20, when 10 state-owned banks were merged into four larger entities, bringing down the number of public sector banks from 27 to 12.
World-Class Banks — But For Whom?
When banks are merged and branded as “world-class,” the first to lose are the youth and middle class.
Employment opportunities shrink, reservations fade, and social inclusion weakens as recruitment slows and automation takes over.These new… pic.twitter.com/7kKb7BfpyB
— TheBanker’sMirror (@bankaffairs) November 6, 2025
Sitharaman, however, hinted that the current effort could go beyond mergers, focusing instead on building the scale and strength needed for Indian banks to compete globally.
“We have to learn from the past and not be fearful of taking bold steps. Fiscal balance will not be compromised even as growth remains our top priority,” she added.
Officials familiar with the development said the government’s aim is to create financial powerhouses with robust balance sheets capable of supporting large-scale credit growth, particularly for infrastructure and industrial sectors.
Analysts believe this renewed consolidation drive signals the government’s intent to reform and modernize the public banking system, improving governance, efficiency, and capital adequacy.
The Finance Minister’s remarks are being viewed as the clearest indication yet that India is preparing for a “Banking Consolidation 2.0”, a move that could redefine the country’s financial landscape over the next few years.
