Overview
- Finance Minister Nirmala Sitharaman said consultations with the RBI and lenders have begun to build larger banks, with work already underway to create a more dynamic operating environment.
- Possible pathways include fresh consolidation, creation of new institutions and selective privatisation, while DFS Secretary M. Nagaraju flagged conversions of NBFCs or small finance banks and digital‑only banks as additional routes.
- RBI Governor Sanjay Malhotra stressed that regulators should not replace bank boards’ judgment, signalling a move away from micromanagement as lenders take case‑by‑case decisions.
- The RBI’s recent package proposes permitting bank‑led acquisition financing with a 70% funding cap and other guardrails, recalibrated exposure and LTV norms, a shift toward expected‑credit‑loss provisioning, and easier external commercial borrowing rules under safeguards.
- Officials said stronger balance sheets underpin these steps, citing CAR near 17.5% and sharply lower NPAs, as the government also urges banks to widen credit, simplify documentation, do in‑house credit assessment and restore local‑language, human‑facing service.