The Union government has clarified that it currently has no plan to merge or consolidate public sector banks, signalling a pause in the major restructuring wave that reshaped India’s state-owned banking landscape over the past decade. The assurance came through a written reply by minister of state for finance Pankaj Chaudhary in the Lok Sabha on December 2.
Chaudhary stated that no proposal on consolidation of public sector banks is under consideration. The clarification comes at a time when sections of the financial sector had been speculating about a fresh round of mergers after the large-scale restructuring exercises completed in 2020.
The minister also outlined the current foreign investment limits in the banking sector—20% for public sector banks and 74% for private banks—under the existing Foreign Exchange Management (Non-Debt Instruments) Rules, 2019.
He described foreign direct investment as a “major source of non-debt capital” that can support long-term economic development, technology transfer, competition, innovation and job creation.
In a separate reply, Chaudhary said the strategic disinvestment of IDBI Bank will move ahead in line with the Cabinet Committee on Economic Affairs’ approval dated May 5, 2021. The plan includes transfer of management control.
Under the approved structure, 60.72% of IDBI Bank’s equity is being offered for strategic sale. This includes 30.48% from the Government of India—leaving it with a post-sale residual stake of 15%—and 30.24% from LIC, whose holding would fall to 19% after the sale.
As of March 2025, the bank’s outstanding capital and liabilities stood at approximately ₹4.11 lakh crore, backed by total assets of the same amount.
Chaudhary also highlighted the improving financial health of regional rural banks. The RRBs reported their highest-ever consolidated net profit of ₹7,571 crore in financial year (FY) 24, followed by ₹6,825 crore in FY25.
The minister attributed the slight decline in FY25 to the rollout of the pension scheme with retrospective effect from November 1, 1993, and payments related to computer increment liabilities.
Despite these costs, RRBs have shown steady improvement in several key indicators including capital adequacy, deposits, advances, non-performing assets and credit–deposit ratio.
While the government has paused consolidation plans, ongoing disinvestments, rising profitability in rural banks and sustained foreign investment interest indicate that broader reforms are still shaping the sector. For now, however, public sector banks will continue operating under their existing structure, with no mergers on the horizon.