High-level committee will decide if India needs more, better or bigger banks: FM Nirmala Sitharaman

FM Nirmala Sitharaman

• A high-level committee will decide if India needs more, better, or bigger banks
• Key issues like PSU bank consolidation and conglomerate entry left to the panel
• Finance Minister will not pre-judge or influence the committee's recommendations

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The high-level committee on banking will determine whether India needs more banks, better banks, or bigger banks, Finance Minister Nirmala Sitharaman said, indicating that key questions such as consolidation of public sector banks and the possible entry of large Indian conglomerates into banking will be left entirely to the panel. She was speaking with Network18 Editor-in-Chief Rahul Joshi in an exclusive interview on February 2.

On being asked whether the government is directionally inclined towards further consolidation of public sector banks to create larger and potentially more viable entities, Sitharaman said. “Let’s wait for the committee to say this. The committee will have to decide whether India needs more banks, better banks, or bigger banks. The committee will have to make up its mind.”

Stressing that the government wants a forward-looking review of the banking sector at a time of strong balance sheets, Sitharaman said, “I have not worked on the terms of reference yet. But the broad intent is that towards Viksit Bharat, there couldn’t be a better time for us, especially now when the banks’ health is very good. We want, from that position of strength, to understand where we can go and how we can get there. That is where we want the committee to work.”

Responding to a question on whether the committee may look at the consolidation of public sector banks to create a few mega banks as opposed to having a large number of PSU banks today, and whether Indian private conglomerates may be allowed to enter banking.

However, Sitharaman made it clear that she would not pre-judge the outcome or offer her personal views ahead of the panel’s recommendations.

“That is for the committee to tell me. As I said, the terms of reference have not been made yet. But when you are looking at banking for Viksit Bharat, there are many such core issues that the committee will have to look at. We will wait and see what it has to say. It would not be right for me to give my views now and pre-empt what they say,” she said.