India mulls creating 3-4 mega state-run banks in next consolidation round: Report

The government is expected to revisit the consolidation of public sector banks (PSBs) in an effort to create larger, globally competitive lenders, The Economic Times reported. The issue will be taken up at the upcoming PSB Manthan scheduled later this month.

According to ET, the last major round of restructuring in 2020 brought down the number of state-run lenders from 27 to 12. A senior official told the paper that while there is a recognized need for Indian banks to scale up globally, any new round of consolidation will depend on synergies and consultations with the lenders themselves. “The earlier mergers were done in consultation with the banks, which is why they proved successful,” the official said, adding that the aim would be to form at least three to four very large banks.

ET further noted that the two-day summit will also include deliberations between PSBs and key infrastructure financing entities such as the National Bank for Financing Infrastructure and Development (NaBFID) and India Infrastructure Finance Company (IIFCL). India is projected to require close to $4.5 trillion in infrastructure investment by 2040 to sustain growth, making the role of stronger banks crucial.

“Larger banks, when aligned with these specialised financiers, can help unlock greater capital flows into infrastructure,” the official told ET.