FM Sitharaman rules out roadmap for PSU bank mergers, panel to review sector reforms
Times of India
by TOI BUSINESS DESKFebruary 23, 2026
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Finance Minister Nirmala Sitharaman has clarified that the Indian government currently lacks a roadmap for merging public sector banks (PSUs), indicating that consolidation is not under active consideration. During a media briefing following her Union Budget 2026-27 address, she emphasized that bank mergers were neither discussed duringBudget preparations nor raised in recent deliberations. However, a new High-Level Committee on Banking for Viksit Bharat has been proposed to review the banking sector and align it with India’s growth goals. This committee will focus on strengthening the banking ecosystem, including enhancing financial stability, inclusion, and consumer protection.
The proposed committee aims to create mega lenders capable of addressing the financing needs of a future developed India. As part of broader financial reforms, Sitharaman also announced plans to restructure Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) to improve efficiency in public sector NBFCs. PFC recently completed its acquisition of a majority stake in REC Ltd., strengthening its role in financing power projects.
RBI Governor Sanjay Malhotra highlighted the robust health of India’s banking sector, stating that banks are adequately capitalized and capable of sustaining credit growth for the next four to five years. He noted that deposit growth is now pacing with credit expansion, ensuring adequate liquidity for economic needs. Malhotra also commented on foreign direct investment (FDI), noting that while gross FDI inflows have risen, net FDI has decreased due to repatriations of earlier investments.
This lack of a merger roadmap and focus on sectoral reforms are significant for India’s financial stability and economic growth. By restructuring key institutions like PFC and REC, the government aims to enhance efficiency and scalability in public finance. The proposed committee’s review of the banking sector will play a crucial role in shaping India’s financial future, ensuring it aligns with the country’s ambitious development goals while maintaining financial resilience.
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Originally published on Times of India on 2/23/2026