The Indian government has set an ambitious target to have at least two public sector banks (PSBs) feature in the list of the world’s top 20 banks by 2047, when the country aims to achieve “Developed Nation” status. Currently, State Bank of India is the only Indian bank in the top 50 banks globally in terms of asset size. This goal was discussed at a recent “Manthan” event for PSBs, where officials and industry leaders agreed that to reach the top 20, PSBs need to expand their scale, strengthen governance, adopt digital banking and artificial intelligence, and build a stronger global footprint.
The government has indicated that consolidation is not part of the roadmap, marking a shift from the merger-driven approach seen in earlier phases of banking reforms. There are currently 12 PSBs, down from 27 in 2017, following a series of mergers. The government has instead urged banks to focus on improving their current account and savings account (CASA) deposits, which have been declining over the past year, putting pressure on their net interest margins.
The largest lender, SBI, saw a marginal decline in its CASA ratio in the June quarter, while Bank of Baroda’s CASA ratio also fell. Improving CASA deposits will also help banks in their lending to key sectors of the economy, such as agriculture and micro, small, and medium enterprises (MSMEs). The Ministry has asked banks to increase their lending to these sectors, which are critical to the Indian economy. The agriculture sector, in particular, is a vital contributor to national income and employment, with nearly 46.1% of the population engaged in agriculture and allied activities.
The government has made significant progress in increasing institutional credit disbursement to farmers, with the Kisan Credit Card (KCC) scheme seeing a significant increase in disbursements from ₹4.26 lakh crore in 2014 to ₹10.05 lakh crore by December 2024. Overall agricultural credit flow has also risen from ₹7.3 lakh crore in FY13-14 to ₹25.49 lakh crore in FY23-24. The government’s emphasis on lending to MSMEs and the agriculture sector is expected to continue, with a focus on promoting economic growth and job creation. While there is no specific timeline for achieving the goal of having two PSBs in the top 20, the government is committed to working towards this target by 2047.