Till a decade ago, India's public sector banks (PSBs) were burdened with huge debt and losses. But now the picture has completely changed. Today these banks are standing very strong with continuously improving balance sheet, continuously decreasing bad loans (NPA) and excellent profits. Now the biggest question arising is whether the time has come to merge these selected banks together and create some very huge global banks? This is exactly what has been recommended in a new report by the Prime Minister's Economic Advisory Council (EAC-PM).
After all, why does the country need big banks? India is currently investing heavily in the fields of infrastructure, manufacturing, renewable energy and modern technology. To finance these big and ambitious projects, the country needs big banks with high risk appetite. If compared globally, India's largest bank SBI currently ranks 43rd in the world. According to last year's data, SBI had assets of about $ 846 billion, while the assets of the world's tenth largest bank were more than $ 2.6 trillion. Even if today the strength of all the 12 public sector banks of India is combined, we still would not be in a position to give direct competition to the top financial institutions of the world.
Merely increasing the size does not guarantee success Merger of banks in India is not a new thing. Between 2017 and 2020, the number of public sector banks in the country was reduced from 27 to 12. Although, at that time the main objective of merger was to save the weak banks, but this time the objective is completely different. The EAC-PM report shows that banks do not become successful merely by increasing their size. According to the FY2026 data, only seven banks have been found to be fully efficient at scale. Combining technology, workforce, and corporate culture during a large merger is a tremendous challenge. Apart from this, the issue of governance is also very important, because if the bank becomes very big but its management remains weak, then it will become a new risk for the entire economy.
Are there really any concrete plans for the merger? Even though the EAC-PM has strongly advocated the creation of mega banks in the country, this is just a strategic suggestion at the moment. There is currently no official proposal from the government for new merger of public sector banks. Only a few months ago, the government had made it clear in the Lok Sabha that no such idea is being considered at present. Despite this, this serious debate cannot be ignored. Public sector banks have consistently performed brilliantly in recent times. According to the data of December 2025, the share of public sector banks in the total bank credit of the country has reached 54.4%. In such a situation, other options like increasing the limit of foreign capital investment in these banks from 20% to 49% are also being discussed rapidly.