Union Finance Minister Nirmala Sitharaman has said India needs more “big, world-class banks” to support its long-term growth ambitions, indicating that discussions are already underway on creating such institutions through further consolidation of state-owned lenders and policy changes.
Speaking at an event on Thursday, Sitharaman said the government, in consultation with the Reserve Bank of India (RBI), is exploring ways to strengthen the country’s banking system by building larger and globally competitive banks.
“India needs a lot of big, world-class banks, and for that we will have to talk with the Reserve Bank (of India) and banks, and to see how they want to take it forward,” Sitharaman said.
India currently has 12 state-owned banks, which together hold assets worth ₹171 lakh-crore as of March 2025—accounting for about 55 percent of the country’s banking sector. The government has been working over the past few years to consolidate its banking system and improve efficiency. In 2020, 27 public sector banks were merged into 12 larger entities to create stronger balance sheets and reduce duplication.
Sitharaman’s latest remarks signal that the government may be considering another round of restructuring, with the aim of positioning Indian banks among the world’s leading financial institutions.
The finance minister noted that creating larger banks could come through further mergers or by encouraging foreign investment in state-owned lenders. It has been reported that the government is evaluating proposals to raise foreign ownership limits in public sector banks to attract more capital.
“The consolidation of existing public sector banks can also be one of the routes to create bigger banks,” Sitharaman said. “But you need an ecosystem in which more banks can operate to grow, and that environment is well established in India—but I need it to be a bit more dynamic. Some work is happening on it.”
She added that while no final decision has been made, preparatory work has already begun. “There’s a lot of work to do prior to my saying yes. Work has already commenced and we are discussing with the RBI and banks,” she said.
The renewed focus on scale and competitiveness in India’s banking sector comes as the country targets becoming a $10-trillion economy by 2047, where a strong, well-capitalised financial system will play a crucial enabling role.
