The Indian government has officially stated that there are no current discussions or proposals to restructure or consolidate the country's public sector banks (PSBs). This clarification came from the Minister of State for Finance, Pankaj Chaudhary, in a written reply to the Lok Sabha on Monday.
No Merger on the Horizon for Public Sector Banks
Responding to queries, Minister Chaudhary categorically stated, "presently, no proposal on merger or consolidation of Public Sector Banks (PSBs) is under consideration of the Government." This statement puts to rest any speculation about further consolidation in the banking sector following the previous round of mergers that reduced the number of major PSBs.
FDI Limits and IDBI Bank Strategic Sale Details
In a separate response, the minister detailed the Foreign Direct Investment (FDI) limits for the banking sector. As per the Foreign Exchange Management (Non-Debt Instruments) Rules 2019, FDI in public sector banks is capped at 20%, while private sector banks can have foreign investment of up to 74%.
Chaudhary emphasized the role of FDI as a major non-debt financial resource that brings long-term capital, technology transfer, and spurs innovation and employment.
The minister also provided a significant update on the strategic disinvestment of IDBI Bank. The process will proceed as per the Cabinet Committee on Economic Affairs (CCEA) decision taken on May 5, 2021. The government's 'in-principle' approval involves the sale of a total 60.72% stake along with management control.
The specific breakdown is as follows:
- The Government of India will sell 30.48% of its stake, retaining 15% equity post-sale.
- The Life Insurance Corporation of India (LIC) will divest 30.24%, keeping a 19% stake afterward.
As of March 2025, IDBI Bank's total capital and liabilities stood at approximately Rs 4.11 lakh crore, matched by its tangible and intangible assets.
Robust Performance of Regional Rural Banks
Minister Chaudhary highlighted the continued financial strengthening of Regional Rural Banks (RRBs). These institutions recorded their highest-ever consolidated net profit of Rs 7,571 crore in the financial year 2023-24 (FY24).
In the following year, FY25, they posted their second-highest profit of Rs 6,825 crore. The minister attributed the slight dip in FY25 profit to the implementation of a pension scheme with retrospective effect from November 1, 1993, and payments related to computer increment liability.
He noted that RRBs have shown improvement across key performance indicators, including their Capital to Risk Weighted Assets Ratio (CRAR), deposit growth, advances, management of non-performing assets (NPAs), and the credit-deposit (CD) ratio.
