Archive · 8 Oct 2026
India’s Big-Bank Push Remains Without a Clear Merger Roadmap
India’s finance minister once said the country needed more very large banks.
That led people to wonder whether government-owned banks would merge again.
The government later said it had no merger plan under consideration.
Instead, it proposed a committee to review how India’s banking system should develop.
The committee’s details were still being worked out in September.
A government advisory council paper has recommended creating a few large banks, but that recommendation is not an official government decision.
Banks are now healthier than before, and some officials say mergers are not the only way to become more competitive.
For now, the government has not said whether banks will merge or grow in other ways.
In November 2025, Finance Minister Nirmala Sitharaman said work had begun on creating larger Indian banks.
The government later told Parliament that no public sector bank merger or consolidation proposal was under consideration.
Sitharaman said in February that she knew of no merger roadmap and pointed to a banking review committee instead.
The proposed High Level Committee on Banking for Viksit Bharat was still being finalised as of September, with its terms of reference unsettled.
An Economic Advisory Council to the Prime Minister paper reportedly recommended creating a few similarly sized large banks, but this is not government policy.
- Who
- Finance Minister Nirmala Sitharaman, the Indian government, and the proposed High Level Committee on Banking for Viksit Bharat.
- What
- The government has not announced a public sector bank merger plan despite earlier remarks about creating larger banks.
- When
- The initial remarks were made in November 2025; the article describes developments through September 2026.
- Where
- India.
- Why
- The government has proposed a broad review of banking to support India’s next phase of growth while protecting financial stability, inclusion, and consumers.
Arguments for greater scale
Arguments for alternatives to mergers
How to build larger, more competitive banks
Arguments for greater scale
Consolidation could create a few large banks, potentially improving scale and international competitiveness.
Arguments for alternatives to mergers
Mergers are not the only route; banks could grow organically, mobilise more capital, expand internationally, or benefit from regulatory changes.
Whether to merge public sector banks
Arguments for greater scale
The Economic Advisory Council to the Prime Minister paper reportedly recommends consolidation to create a few broadly equal-sized large banks.
Arguments for alternatives to mergers
The government has said no merger proposal is under consideration, and the advisory paper is a recommendation rather than government policy.
- Earlier consolidation
- In 2020, 10 state-owned banks were merged into four, reducing the number of public sector banks from 27 to 12.
- Minister’s initial statement
- In November 2025, Sitharaman said India needed “a lot of big banks, world-class banks” and that work had commenced.
- Government position
- In December 2025, the Finance Ministry told the Lok Sabha that no public sector bank merger or consolidation proposal was under consideration.
- Committee
- The 2026-27 Budget proposed a High Level Committee on Banking for Viksit Bharat; its composition and terms of reference were still being worked out as of September.
- Public sector bank asset quality
- The article cites an aggregate gross NPA ratio of 1.9 percent by March 2026.
- Public sector bank profits
- Their combined net profit reached a record ₹1.98 lakh crore in FY26, according to figures cited at the August PSB Confluence.
- Advisory recommendation
- An Economic Advisory Council to the Prime Minister paper reportedly recommended creating a few large banks of broadly equal size without compromising competition.