Bank Merger: Public sector banks to merge! Indian banking will get a global face in 2026

 


PSU Bank Consolidation: Currently, there are 12 public sector banks in the country. Only the State Bank of India (SBI) is among the top 50 banks globally by assets. SBI ranks 43rd globally by assets.

PSU Bank Consolidation: The process of consolidation among public sector banks may accelerate in the coming year, as the government has expressed its desire to create more large, world-class banks in the country as part of its goal of a “developed India” by 2047. Finance Minister Nirmala Sitharaman stated last month that India needs several large, world-class banks, and work in this direction has already begun. She stated that the government has initiated discussions with the Reserve Bank of India (RBI) and public sector banks in this regard, which clearly signals the consolidation of public sector banks.

The Challenge of Breaking into the World’s Top Banks

Currently, there are 12 public sector banks in the country. Only the State Bank of India (SBI) is among the top 50 banks globally by assets. SBI ranks 43rd globally by assets, followed by the private sector HDFC Bank at 73rd.

The government has already consolidated banks in two phases, reducing the number of public sector banks from 27 to 12. United Bank of India and Oriental Bank of Commerce were merged with Punjab National Bank (PNB).

Syndicate Bank merged with Canara Bank, Allahabad Bank merged with Indian Bank, and Andhra Bank and Corporation Bank merged with Union Bank of India.

Earlier in 2019, Dena Bank and Vijaya Bank merged with Bank of Baroda.

IDBI Bank Privatization

The government has also initiated the process of privatizing IDBI Bank, and Arunish Chawla, Secretary, Department of Investment and Public Asset Management, expressed hope that the strategic sale will be completed by March 2026.

The net profit of public sector banks is expected to cross the historic level of ₹2 lakh crore by the end of fiscal year 2025-26.

Foreign investment in private banks increased

On the other hand, the private banking sector saw a significant inflow of foreign capital. In May, Japan’s Sumitomo Mitsui Banking Corporation decided to acquire a 20% stake in Yes Bank for ₹13,483 crore. The deal was completed in September.

In October, Emirates NBD Bank of the United Arab Emirates decided to acquire a 60% stake in RBL Bank for ₹26,853 crore.

Historic Reforms in the Insurance Sector

Regarding the insurance sector, the “Sabka Bima Sabki Raksha” (Insurance Laws Amendment) Bill, 2025 was passed in Parliament this year, paving the way for 100% foreign direct investment in the sector. The insurance sector also benefited from the reduction in GST rates.

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