Finance Minister Nirmala Sitharaman said the government currently does not have a roadmap for mergers between public sector banks, noting that the merger is not under active consideration even as a new banking reform committee has been appointed to review the future of the sector.“I am not aware of any road map… there is not one,” Sitharaman said at a press conference after her usual post-budget address to the RBI board.
Nirmala Sitharaman reacts to US tariff ruling, says it’s too early to comment on India’s impact
She clarified that the consolidation of banks was not discussed during the budget preparation and was not raised in the recent deliberations, even though the high-level committee on banking for Vixit Bharat will examine all aspects related to strengthening the banking ecosystem.“Bank consolidation was not an issue here, nor was it an issue before the Budget, but the committee, which is being appointed now, once the terms of reference are defined, will look at every aspect of how to strengthen Indian banking,” she said.In the Union Budget 2026-27, Sitharaman proposed setting up a ‘High-Level Committee on Banking for Vixit Bharat’ to undertake a comprehensive review of India’s banking sector and align it with the country’s growth objectives while maintaining financial stability, inclusion and consumer protection.
“I propose setting up a ‘High-Level Committee on Banking for Vixit Bharat’ to conduct a comprehensive review of the sector and align it with India’s next phase of growth, while maintaining financial stability, inclusion and consumer protection,” she said in her Budget speech on February 1.The committee is expected to develop a plan aimed at creating large lenders capable of meeting the financing needs of developed India.As part of broader financial sector reforms, the Budget also proposed restructuring the Power Finance Corporation (PFC) and the Rural Electrification Corporation (REC) to bring scale and improve efficiency in public sector NBFCs. REC is a subsidiary of state-owned energy sector lender PFC, and both institutions play a major role in financing power generation, transmission and distribution projects.In March 2019, PFC completed the acquisition of a majority stake in REC Ltd by transferring Rs 14,500 crore to the government.
PFC acquired Rs 103.94 crore equity shares, representing a 52.63 per cent stake, along with management control, at a price of Rs 139.50 per share after approval by the Cabinet Committee on Economic Affairs.Commenting on the health of the banking sector, RBI Governor Sanjay Malhotra said that banks are adequately capitalized and capable of sustaining credit growth over the next four to five years, supporting the financing needs of the economy.He added that deposit growth is now keeping pace with credit expansion.Regarding moderation in net FDI, Malhotra said that total FDI inflows continued to rise.Last year, he said, “It has increased by about 14-15 per cent. Even this year, the total FDI has increased, and the growth rate has also been high. This is because people who had done FDI earlier are returning home. FDI has gone out. Net FDI has come down.”Likewise, he said Indian companies are increasingly investing abroad as domestic economic measures have boosted confidence, which has also contributed to lower levels of net FDI.
