India Aims to Develop World-Class Banks, Says Finance Minister
Finance Minister Nirmala Sitharaman stated that significant preliminary work is required before any final decisions are made regarding banking sector consolidation. Discussions with the Reserve Bank of India (RBI) and the banks themselves have already begun to create an ecosystem that supports world-class banking institutions.
Collaborations with RBI and Banks
At a Banking and Economics Conclave organized by the State Bank of India (SBI), Sitharaman emphasized the need for large and globally competitive banks in India. She explained:
“India needs a lot of big and world-class banks, and for that, of course, we will have to sit and talk with the Reserve Bank and also with the banks themselves to see how they want to take it forward and also discuss with the RBI about how they have an idea of building larger banks.”
She indicated that consolidation would not merely involve mergers among existing banks but requires a supportive environment and dynamic ecosystem for new and existing banks to grow sustainably.
Ongoing Efforts to Strengthen the Banking Ecosystem
Sitharaman added:
“We are discussing with the RBI and banks. It is not by creating from among those which exist today just by amalgamation… that can also be one of the routes, but you need an ecosystem and also an environment in which more banks can operate and operate to grow. That environment is actually well established in India but I need it to be a bit more dynamic. Some work is happening on it.”
History of Public Sector Bank Consolidation
- The first phase of Public Sector Bank (PSB) consolidation began in 2017 with the merger of five associate banks and Bharatiya Mahila Bank into the State Bank of India.
- In 2019, Vijaya Bank and Dena Bank merged with the Bank of Baroda.
These mergers aimed to create stronger, more efficient banks in the public sector.
Author’s summary: India is actively working with the RBI and banks to build larger, world-class banks through creating a supportive ecosystem, beyond mere mergers, to strengthen its financial sector.