Integration of government banks will gain momentum in 2026, preparations to create a world class bank

New Delhi. The process of consolidation in public sector banks may accelerate in the coming year as the government intends to create more large and world-class banks in the country as part of its goal of a ‘developed India’ by 2047. Finance Minister Nirmala Sitharaman had said last month that India needs many large, world-class banks and work in this direction has already started.

He had said that the government has started discussions with the Reserve Bank of India and public sector banks in this regard, which has given a clear indication of integration in the public sector. At present there are 12 public sector banks in the country. Only State Bank of India is included in the top 50 banks of the world on the basis of assets. On the basis of assets, SBI is ranked 43rd globally.

After this, private sector HDFC Bank is at 73rd position. The government has already consolidated banks in two phases, reducing the number of public sector banks from 27 to 12. Under this, United Bank of India and Oriental Bank of Commerce were merged into Punjab National Bank. Syndicate Bank was merged into Canara Bank, Allahabad Bank was merged into Indian Bank, and Andhra Bank and Corporation Bank were merged into Union Bank of India. Earlier Dena Bank and Vijaya Bank were merged into Bank of Baroda.

The government has also started the process of privatization of IDBI Bank and Arunish Chawla, Secretary, Department of Investment and Public Asset Management, has expressed hope that the strategic sale will be completed by March 2026. Net profit of public sector banks is expected to cross the historic level of Rs 2 lakh crore by the end of financial year 2025-26. On the other hand, the private banking sector saw a large inflow of foreign capital. Japan’s Sumitomo Mitsui Banking Corporation had in May decided to acquire 20 per cent stake in Yes Bank for Rs 13,483 crore. The deal was completed in September.

UAE’s Emirates NBD Bank in October decided to buy 60 per cent stake in RBL Bank for Rs 26,853 crore. Talking about the insurance sector, this year the Sabka Bima Sabka Raksha (Insurance Laws Amendment) Bill, 2025 was passed in the Parliament, paving the way for 100 percent foreign direct investment in this sector. The insurance sector also got the benefit of GST rate cut.