FM Sitharaman Dismisses PSU Bank Merger Roadmap, Announces Panel to Evaluate Sector Reforms
The Indian government is currently not considering any mergers among public sector banks, according to Finance Minister Nirmala Sitharaman. During a recent media briefing, she stated that there is no existing roadmap for such consolidations, even as a new banking reform panel prepares to assess the future of the sector. Sitharaman emphasized that discussions on bank mergers did not take place during the Budget preparations, although a newly proposed committee will explore ways to strengthen the banking ecosystem.
No Roadmap for Bank Mergers
Finance Minister Nirmala Sitharaman made it clear that the government has no plans for merging public sector banks. In a media briefing following her address to the Reserve Bank of India Board, she stated, “I am not familiar with any roadmap…there isn’t one.” This statement indicates that consolidation is not currently on the agenda, despite the establishment of a High-Level Committee on Banking for Viksit Bharat, which aims to review the banking sector comprehensively. Sitharaman noted that bank consolidation was not discussed during the recent Budget deliberations, reinforcing the idea that the government is not prioritizing this issue at present.
High-Level Committee on Banking for Viksit Bharat
In the Union Budget for 2026-27, Sitharaman proposed the formation of a High-Level Committee on Banking for Viksit Bharat. This committee is tasked with reviewing the banking sector to align it with India’s growth objectives while ensuring financial stability, inclusion, and consumer protection. The Finance Minister highlighted the committee’s role in examining various aspects of the banking ecosystem. She stated, “The Committee, which is now being appointed, once the terms of reference are given, will look into every aspect of how to strengthen Indian banking.” The committee is expected to create a blueprint for developing large financial institutions capable of meeting the demands of a growing economy.
Restructuring Public Sector Financial Institutions
As part of broader financial sector reforms, the recent Budget also proposed restructuring the Power Finance Corporation (PFC) and the Rural Electrification Corporation (REC). These institutions are crucial for financing power generation, transmission, and distribution projects in India. The restructuring aims to enhance efficiency and scale within public sector non-banking financial companies (NBFCs). In March 2019, PFC acquired a majority stake in REC, which further underscores the importance of these entities in the financial landscape. Sitharaman’s proposals reflect a commitment to improving the operational capabilities of public sector financial institutions.
Health of the Banking Sector
RBI Governor Sanjay Malhotra provided insights into the current health of the banking sector, stating that banks are well-capitalized and positioned to support credit growth over the next four to five years. He noted that deposit growth is now aligning with credit expansion, which is a positive sign for the economy. Malhotra also addressed the recent moderation in net foreign direct investment (FDI), explaining that while net FDI has decreased, gross FDI inflows have continued to rise. He attributed this growth to repatriations from previous investments and highlighted that Indian companies are increasingly investing abroad, reflecting a strengthened domestic economic environment.
Observer Voice is the one stop site for National, International news, Sports, Editor’s Choice, Art/culture contents, Quotes and much more. We also cover historical contents. Historical contents includes World History, Indian History, and what happened today. The website also covers Entertainment across the India and World.
Follow Us on Twitter, Instagram, Facebook, & LinkedIn
