Archive · 27 Aug 2026
Panel urges more Indian bank mergers for larger lenders
A government advisory group wants India to consider merging more banks.
It says a few large banks could better fund big projects.
The group also says banks should remain competitive with one another.
Earlier mergers reduced the number of public-sector banks from 27 to 12.
However, taking over weaker banks sometimes reduced the efficiency of the stronger banks.
The group says future mergers must produce lasting improvements.
The government and the Reserve Bank of India are discussing wider banking reforms.
The paper also says digital technology and artificial intelligence could help banks work more efficiently.
The EAC-PM has recommended further bank consolidation to create several large, similarly sized Indian lenders.
It said larger banks could have stronger capital, wider reach and greater capacity to finance major projects.
Previous mergers reduced India’s public-sector banks from 27 to 12 between 2017 and 2020.
The paper cautioned that acquiring weaker banks had hurt some lenders’ efficiency and productivity.
The government and RBI are discussing broader reforms, while the paper identifies digitisation and AI as future productivity drivers.
- Who
- The Economic Advisory Council to the Prime Minister made the recommendation; the government and Reserve Bank of India are discussing wider reforms.
- What
- The EAC-PM proposed further consolidation to create a few large, similarly sized banks while preserving competition.
- When
- The recommendation appeared in an EAC-PM working paper; the finance minister discussed further consolidation in November 2025.
- Where
- India.
- Why
- The proposal aims to strengthen banks’ capital, geographic reach and ability to finance large projects, while improving efficiency and productivity.
Arguments for consolidation
Concerns about consolidation
Bank size and project financing
Arguments for consolidation
The EAC-PM says larger banks would have stronger capital bases, wider geographic reach and greater capacity to finance large projects.
Concerns about consolidation
The paper cautions that consolidation should not compromise competition in the banking industry.
Efficiency gains
Arguments for consolidation
Mergers can create scale and potential operational synergies, according to the working paper.
Concerns about consolidation
The benefits depend on successful technology integration, harmonised risk cultures and sustained productivity improvements.
Taking over weaker lenders
Arguments for consolidation
Consolidation can strengthen the banking system by combining institutions and creating larger lenders.
Concerns about consolidation
The paper says acquiring weaker banks has affected the efficiency and productivity of some acquiring institutions, so future mergers must deliver sustainable gains.
- Recommendation
- Pursue further consolidation to create a few large banks of comparable size.
- Public-sector bank count
- The number fell from 27 to 12 after consolidation between 2017 and 2020.
- Earlier mergers
- Major examples included the 2017 State Bank of India associate-bank merger, the 2019 Bank of Baroda-Vijaya Bank-Dena Bank merger and the 2020 consolidation of 10 public-sector banks into four.
- Caution
- The paper said takeovers of weaker lenders had affected the efficiency and productivity of acquiring banks.
- Reform discussions
- The government and Reserve Bank of India are discussing consolidation, governance, efficiency and lenders’ capacity to support economic financing.
- Technology
- The paper identified bank digitisation paired with artificial intelligence as a future driver of productivity.