No roadmap for now: FM Sitharaman clarifies on public sector banks merger

Finance Minister Nirmala Sitharaman on Monday clarified that the government currently has no roadmap for the merger of public sector banks (PSBs). However, she stressed that the newly proposed High-Level Committee on Banking for Viksit Bharat would review the future of the banking sector, including aspects like consolidation.

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"I am not familiar with any roadmap...there isn't one," Sitharaman said, responding to a question on potential mergers of state-owned banks. The clarification came during a briefing after her post-Budget customary address to the Board of the Reserve Bank of India.

"Bank consolidation was not a subject here, nor was it a subject before the Budget, but the Committee, which is now being appointed, once the terms of reference are given, they will look into every aspect of how to strengthen Indian banking," she said. 

In the Union Budget for 2026-27, Sitharaman proposed setting up the High-Level Committee on Banking for Viksit Bharat to review the sector's alignment with the nation's growth ambitions. The committee is expected to work on creating large-scale, efficient financial institutions capable of supporting India's transformation into a developed economy. The committee will also ensure that this growth is achieved while maintaining financial stability, promoting inclusion, and ensuring consumer protection.

Further, the Finance Minister shared that to improve efficiency and scale in public sector non-banking financial companies (NBFCs), the government has proposed a restructuring of Power Finance Corporation (PFC) and Rural Electrification Corporation (REC), two major entities in the power sector. This restructuring, she noted, would contribute to enhancing the funding capacity for power generation, transmission, and distribution projects, which are essential for India’s infrastructure development.

RBI on Banking Sector and FDI

In parallel, RBI Governor Sanjay Malhotra assured that Indian banks are well-capitalised and in a strong position to support the country's credit growth needs for the next 4-5 years. He highlighted that deposit growth is now keeping pace with rising credit demand, indicating a positive outlook for India's banking sector.

On the issue of foreign direct investment (FDI), Malhotra explained that while net FDI had shown a decline, gross FDI continues to rise, with an increase of 14-15% in the previous year. The decline in net FDI, he said, is due to increased repatriation and higher outward investments by Indians who are feeling more confident due to domestic economic reforms.