The Indian government is poised to introduce a comprehensive transformation roadmap for public sector banks (PSBs) in the upcoming Budget 2026-27, strategically aligning with the ambitious Viksit Bharat 2047 vision. This significant initiative aims to fundamentally reshape the banking landscape through structural reforms, accelerated technology adoption, and enhanced global competitiveness.
Strategic Framework for Global Banking Leadership
According to sources familiar with the developments, the framework will outline broad contours for institutional strategy, modernizing banking infrastructure, and building globally competitive banks capable of leveraging digital technology and innovative business models to scale performance. The strategy, likely to be highlighted in the FY27 Budget speech, is specifically designed to position PSBs to break into the elite top 20 global banks—a key government objective under the Viksit Bharat framework.
Government's Clear Vision for Banking Excellence
A senior official, speaking on condition of anonymity, revealed that the plan would outline the intent "for a transformation roadmap for PSBs to break into the top 20 global banks, with a focus on best practices, including operational efficiency and corporate governance." The government has already established clear targets, aiming for at least two Indian state-owned banks to rank among the world's top 20 by 2047, seamlessly integrating with the broader development goals of Viksit Bharat 2047.
Financial Services Secretary M. Nagaraju has previously emphasized that PSBs have moved beyond mere survival and stability phases and are now positioned to play a larger role as "champions of growth, innovation and leadership" in India's economic growth journey. This transformation represents a strategic shift from defensive banking to proactive market leadership.
Comprehensive Transformation Priorities
Beyond global benchmarking, the transformation plan is expected to prioritize several critical areas:
- Strengthening asset quality through improved credit assessment and monitoring systems
- Enhancing risk management frameworks to address evolving financial challenges
- Implementing robust resolution mechanisms for stressed assets
- Building an inclusive, modern workforce equipped with digital skills and contemporary banking knowledge
Building on Recent Banking Successes
The transformation initiative follows productive discussions at PSB Manthan, a two-day banking conclave held in December 2025, where stakeholders established immediate priorities and a long-term pathway for PSBs to evolve into world-class institutions. This collaborative approach ensures that practical insights from banking professionals inform the transformation strategy.
Recent financial performance indicators demonstrate the strong foundation upon which this transformation will build. PSBs reported a combined net profit of Rs 93,675 crore in the first half of the current fiscal year, with gross non-performing assets falling to a multi-year low of 2.30%. These figures underscore significant improvements in balance-sheet health and operational efficiency.
Sustaining Momentum Through Strategic Initiatives
In a November 2025 review meeting, the government urged PSBs to further strengthen risk management, underwriting standards, and operational resilience to sustain profitability in a dynamic economic environment. Banks were specifically directed to ramp up credit to key growth sectors including:
- Renewable energy and green infrastructure projects
- Food processing and agricultural value chains
- Tourism and hospitality development
- Data centers and digital infrastructure
Additionally, PSBs were instructed to adopt sustainable financing practices, including preparedness for an expected credit loss (ECL) provisioning framework. This comprehensive approach ensures that banking transformation aligns with broader national priorities while maintaining financial stability and responsible lending practices.
The Budget 2026-27 PSB transformation roadmap represents a pivotal moment in India's banking evolution, combining strategic vision with practical implementation frameworks to create globally competitive financial institutions that can drive economic growth while serving diverse customer needs across the nation.
