Government Plans New Round of Bank Mergers, Confirms Nirmala Sitharaman

New Delhi (The Uttam Hindu): Union Finance Minister Nirmala Sitharaman on Thursday hinted at a fresh phase of bank consolidation and expansion in India’s public sector banking system. She said that banks need to focus not only on technology but also on person-to-person contact to strengthen their customer base, while also prioritizing local languages for better accessibility.

The Finance Minister said, “India needs several large, world-class banks. For this, we must sit with the Reserve Bank of India (RBI) and financial institutions to decide how to take this forward. Work on this has already begun.” Sitharaman added that both the government and RBI are exploring multiple options to shape the next phase of India’s banking system, including mergers of existing banks and the creation of new financial institutions.

She emphasized that India’s banking sector must become more dynamic to meet the growing credit demand and infrastructure financing needs. “We have to build an ecosystem where more banks can operate, expand, and thrive,” she said.

Over the past decade, the government has carried out major mergers of public sector banks to improve efficiency and scale. Sitharaman suggested that the upcoming reforms would go beyond mergers and include broader structural changes.

India has already witnessed two major merger waves. In 2017, the State Bank of India (SBI) merged its associate banks, and in 2019, 10 public sector banks were consolidated into four, reducing the total number of PSBs from 27 to 12. According to a recent Mint report (October 27), the central government is preparing a new blueprint for selective mergers to streamline operations and strengthen key public sector banks.

AI Policy to Follow ‘Soft-Touch’ Approach

Speaking on technology, Sitharaman said that India plans to adopt a balanced regulatory framework for Artificial Intelligence (AI). “I am discussing AI and its regulation with both the RBI and NITI Aayog,” she said, adding that the government’s aim is to encourage innovation while ensuring ethical use and national security.