Overview
- Discussions are underway between the Finance Ministry, the Reserve Bank of India, and state-owned banks on a fresh consolidation drive to build larger, globally competitive lenders.
- Finance Minister Nirmala Sitharaman has called for “many big, world-class banks” and indicated that preparatory work on consolidation has begun.
- The 12 public sector banks reported a combined net profit of Rs 93,675 crore in the first half of FY26, with full-year earnings expected to exceed Rs 2 lakh crore if current trends continue.
- Earlier merger rounds in 2017 and 2019–20 reduced the number of PSBs from 27 to 12, offering a template for potential transactions that could accelerate in 2026.
- Parallel shifts include the IDBI Bank strategic sale targeted by March 2026, major foreign investments in private lenders by SMBC and Emirates NBD, and a new law permitting 100% FDI in insurance.