FM confirms work underway on public sector bank consolidation

Finance Minister Nirmala Sitharaman on Thursday (November 6) said that work has begun on the next phase of public sector bank (PSB) consolidation.

Speaking at an event, the minister said India needs “a lot of big, world-class banks” to meet the growing needs of a fast-expanding economy.

“We will need to sit and talk with the Reserve Bank of India (RBI) and banks on how they want to take it forward, and also discuss with the RBI how they want to build larger banks,” she said.

Sitharaman added that discussions with the central bank and banks are already underway. “Work has commenced. We are discussing with the RBI and banks. This is not just about amalgamation. We need an environment where banks can operate and grow,” she noted, indicating that the approach would go beyond simple mergers to fostering institutional and regulatory capacity for scale.

The statement marks the first clear confirmation from the government that it is actively exploring the next phase of PSB consolidation after the last major round in 2020, when 10 public sector banks were merged into four larger entities.

The minister also emphasised the need for banks to deepen and widen credit flows in the current economic environment marked by global uncertainty. “Volatility and uncertainty are everyday language, be it currency, exchange rates, or globally driven inflation. Banks have to make sure they deepen and widen credit flow,” she said.

Reiterating the government’s commitment to fiscal discipline, Sitharaman said India continues to maintain “sustained self-reliance” in its fiscal approach. “We are ensuring fiscal balance is not threatened while growth aims are maintained,” she said.

The Finance Minister added that India must sustain its reform momentum across sectors, including at the judicial and state government levels. “We should learn from the past and not be fearful of steps to be taken,” she said, noting that India’s economic resilience has been evident despite global headwinds.Read about our editorial guidelines and ethics policy