Govt in talks with RBI, lenders on forming large banks: FM Sitharaman
Mumbai, Nov 7, 2025
"There is a lot of work to do prior to my saying yes. The work has already commenced. We are discussing with the RBI and banks," the finance minister said
Indicating that talks for the second phase of consolidation among Indian public-sector banks are underway, Union Finance Minister Nirmala Sitharaman on Thursday said that the government has begun discussions with the Reserve Bank of India (RBI) and the banks on building the ecosystem to create bigger banks in India. The merger of public-sector banks is one of the routes for forming large banking entities in the country, the minister noted.
“India needs a lot of big banks and world class banks. We will have to sit and talk with the banks themselves to see how they want to take it forward and also discuss with RBI about how they have an idea of taking or the idea of building larger banks,” Sitharaman said at the SBI Banking and Economics Conclave.
“There is a lot of work to do prior to my saying ‘Yes’. The work has already commenced. We are discussing with the RBI and banks,” the finance minister said. Signalling that the Centre and the banking regulator is considering multiple routes, including that of mergers, to create large banks, she added: “You need an ecosystem and an environment in which more banks can operate and grow.”
The first phase of consolidation among public-sector banks was undertaken over 2018-19 and 2019-20, when 13 banks were folded into five. In addition, SBI merged with its associate banks and Bharatiya Mahila Bank.
India now has 12 public sector banks, and only one is in the top 50 list of global banks by assets. State Bank of India (ranked 43) and HDFC Bank (ranked 73) are in the top 100 global banks according to S&P Global Ratings. The top four global banks are from mainland China which has seven banks among the top 20.
The finance minister also said the government is not looking to shut the door on futures and options (F&O) trading but will strive to ease hurdles.
“The government is aware of the losses happening in F&O. The government cannot stop people from investing. Government is here to remove the roadblocks and work on them,” she said while adding it is investors' responsibility to understand the associated risks.
Greater financial awareness can be built by reaching out to people in every village, she said. Speaking at the Business Standard BFSI Summit last week, Sebi chairman Tuhin Kanta Pandey had said: “Weekly (F&O expiry) is a very sensitive subject and has a lot of nuances. There has been a problem in the derivatives market, which has been highlighted by SEBI."
The finance minister also emphasised the need for bankers at branches to have a person to person connect with customers and mooted the use of local language in communications. “You have to be a lot more proactive, reach out, widen your customer base and also make sure that what you do will have to be a blend of both old-fashioned banking with the new technology driven banking,” she said.
“Language is an important way in which you communicate with your customers. The only flag which I am unable to defend on behalf of the public sector banks is when they say because of our Human Resources policy, we post people with different mother tongues to different areas" "At least if the top management doesn’t speak, the branch level officials should speak [the local language]. And I would strongly push towards the performance appraisal based on his or her efficiency in the local language," she stressed.
On the ease of getting loans, the minister said credit will have to be made available and the process must be made simpler. “There is a need for making paperwork simple. You will have to make your processes simple. You can’t be putting the onus on the borrower to go on proving and providing documents till debt comes,” she said.
Fiscal prudence, financial inclusion, and a robust financial and banking ecosystem will ensure that India’s growth remains broad-based and sustainable, she underlined. “Banks have helped in economic Atmanirbharta by aiding financial inclusion and credit creation. There are now 56 crore Jan Dhan Accounts,” she noted during her speech.
[The Business Standard]
