The Indian government has officially stated that it is not currently evaluating any plans for further consolidation among Public Sector Banks (PSBs). This clarification was presented to the Lok Sabha on the opening day of the Winter Session of Parliament, putting to rest recent speculation about potential mergers to create larger banking entities.
Government's Stance on Bank Consolidation
In a written response to a query, Minister of State for Finance, Pankaj Chaudhary, explicitly said, "Presently, no proposal on merger or consolidation of Public Sector Banks (PSBs) is under consideration of the Government." This statement comes amid media reports suggesting the administration was looking to merge the existing 12 state-owned lenders to build financial behemoths capable of competing on a global scale.
The current roster of 12 PSBs includes Bank of Baroda, Bank of India, Bank of Maharashtra, Canara Bank, Central Bank of India, Indian Bank, Indian Overseas Bank, Punjab National Bank, Punjab & Sind Bank, State Bank of India, UCO Bank, and Union Bank of India. The last major consolidation in the sector occurred in 2019, when 10 public sector banks were amalgamated into four, reducing the total number to the present twelve.
Focus on Global Competitiveness and IDBI Bank Disinvestment
While immediate mergers are off the table, the government's long-term vision for PSBs remains ambitious. As reported earlier, during the 'PSB Manthan' conference in September, discussions centered on strategies to make these banks "globally competitive" with the goal of placing at least one or two among the world's top 20 banks by 2047. Currently, the State Bank of India, ranked 43rd globally by assets, is the only Indian public sector bank in the top 100.
In a separate but significant update, the Finance Ministry provided crucial details on the strategic disinvestment of IDBI Bank. Finance Minister Nirmala Sitharaman, in her written reply, informed the house that the transaction is currently in the due diligence stage being conducted by shortlisted bidders. She added that the identities of these bidders cannot be disclosed until the transaction is complete.
The process follows security clearances from the Ministry of Home Affairs (MHA) and a fit-and-proper evaluation by the Reserve Bank of India (RBI). The Cabinet Committee on Economic Affairs had approved the strategic sale in May 2021, with the Central government and the Life Insurance Corporation of India (LIC) together offering 60.72% of the bank's ownership and management control.
Privatisation Agenda and Stake Details
Minister Chaudhary also clarified that, apart from IDBI Bank, there is no current proposal to privatise any other public sector banks. This updates the government's earlier stance outlined in the 2021-22 Union Budget, which proposed the privatisation of two PSBs.
The stake sale structure for IDBI Bank is as follows:
- The Central Government is offering a 30.48% stake.
- LIC is offering a 30.24% stake.
- Post-sale, the government's holding will reduce to 15%.
- LIC's stake will come down to 19%.
This move marks a pivotal step in the government's disinvestment strategy and will be closely watched by investors and the banking sector alike. The clarification on mergers indicates a period of stability and internal strengthening for PSBs as the IDBI Bank sale process reaches an advanced stage.
