Government Has No Active Roadmap for Public Sector Bank Mergers, Says Finance Minister
Finance Minister Nirmala Sitharaman has stated that the government currently has no roadmap for mergers among public sector banks, indicating that consolidation is not under active consideration. This clarification comes even as a new high-level banking reform panel is set to review the sector's future.
"I Am Not Familiar with Any Roadmap"
"I am not familiar with any roadmap...there isn't one," Sitharaman said during a media briefing following her post-Budget customary address to the Board of the Reserve Bank of India. She emphasized that bank consolidation was neither discussed during Budget preparations nor raised in recent deliberations.
However, she noted that the proposed High-Level Committee on Banking for Viksit Bharat will examine all aspects related to strengthening the banking ecosystem. "Bank consolidation was not a subject here, nor was it a subject before the Budget, but the Committee, which is now being appointed, once the terms of reference are given, they will look into every aspect of how to strengthen Indian banking," she explained.
New Banking Committee to Review Sector
In the Union Budget 2026-27, Sitharaman proposed setting up a 'High Level Committee on Banking for Viksit Bharat' to comprehensively review India's banking sector. The committee aims to align the sector with the country's growth goals while safeguarding financial stability, inclusion, and consumer protection.
"I propose setting up a 'High Level Committee on Banking for Viksit Bharat' to comprehensively review the sector and align it with India's next phase of growth, while safeguarding financial stability, inclusion and consumer protection," she had said in the Budget speech on February 1.
The committee is expected to draw up a blueprint aimed at creating mega lenders capable of meeting the financing needs of a developed India.
Broader Financial Sector Reforms
As part of broader financial sector reforms, the Budget also proposed restructuring Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) to achieve scale and improve efficiency in public sector NBFCs. REC is a subsidiary of state-owned power sector lender PFC, and both institutions play a key role in financing power generation, transmission, and distribution projects.
In March 2019, PFC completed the acquisition of a majority stake in REC Ltd by transferring Rs 14,500 crore to the government. PFC acquired 103.94 crore shares, representing a 52.63 percent stake, along with management control, at Rs 139.50 per share following approval from the Cabinet Committee on Economic Affairs.
RBI Governor Comments on Banking Sector Health
Commenting on the banking sector's health, RBI Governor Sanjay Malhotra said banks are adequately capitalised and capable of sustaining credit growth for the next four to five years, supporting the economy's financing needs. He added that deposit growth is now keeping pace with credit expansion.
On moderation in net foreign direct investment (FDI), Malhotra said gross FDI inflows have continued to rise. "It increased by about 14-15 percent. Even this year, gross FDI has increased, and the growth rate is also high. It's because of repatriations of those people who had done earlier FDI. It has gone out. The net (FDI) has decreased," he explained.
Similarly, he noted that Indian companies are increasingly investing overseas as domestic economic measures have strengthened confidence, which has also contributed to lower net FDI levels.
