Overview

• Officials from the Finance Ministry and the Reserve Bank of India have started preliminary discussions on issuing fresh bank licences for the first time since 2014.
• Proposals under consideration include converting non-bank finance companies and small finance banks into full-service banks under strict promoter shareholding limits.
• Regulators are weighing mergers of smaller public sector banks to create larger, more resilient institutions capable of funding infrastructure and manufacturing projects.
• Discussions also cover easing the 20% foreign direct investment cap in state-run banks while retaining majority government ownership to attract international capital.
• Investors responded positively to the report, sending the Nifty PSU Bank Index up 0.5% and boosting its year-to-date gains to around 8%.