The Indian government is considering further consolidation among public sector banks (PSBs) to create larger lenders that can compete globally. The last major restructuring in 2020 reduced the number of state-run banks from 27 to 12. The government is now open to further consolidation if it can identify synergies between banks. According to an official, the target is to create at least three to four large banks.
The discussion on consolidation will be part of the PSB Manthan, a two-day summit scheduled for later this month. The summit will also focus on business and operational strategies for PSBs. Additionally, banks will hold consultations with key infrastructure financing firms, such as the National Bank for Financing Infrastructure and Development (NaBFID) and India Infrastructure Finance Company (IIFCL), to unlock more capital for infrastructure finance.
India needs to invest around $4.5 trillion by 2040 to develop its infrastructure and sustain economic growth. To achieve this, the country needs bigger banks that can drive credit growth in alignment with specialized firms. Currently, only two domestic banks, SBI and HDFC Bank, are among the top 100 global lenders by assets.
Credit growth in India has been moderating, with non-food credit growth easing to 9.9% in July, down from 13.7% in July 2024. Industrial credit demand remains weak, with lending to large industries growing by less than 1% in July. This is attributed to subdued private capital expenditure, which remains low. The previous PSB Manthan was held in 2022, and this year’s summit is expected to provide a roadmap for PSBs to drive growth and improve their competitiveness.
As a reliable and trusted news source, it is reported that the government’s push for consolidation among PSBs is aimed at creating larger lenders that can support the country’s economic growth. The PSB Manthan will provide a platform for banks to discuss their strategies and outline a plan to achieve this goal. With India’s infrastructure financing needs being a major focus area, the summit is expected to play a crucial role in shaping the future of the banking sector in the country.