No PSU Bank Merger on the Table, Says Government—Policy Clarity Boosts Sector Stability
The government has officially clarified that no merger or consolidation of public‑sector banks (PSBs) is currently under consideration.
This statement, delivered by Minister of State for Finance Pankaj Chaudhary in the Lok Sabha, brings a clear signal of stability to India’s banking landscape at a time when speculation around the next phase of consolidation had begun resurfacing.
Key Highlights
No PSU Bank Consolidation for Now
Despite market chatter, the Centre confirmed that no active proposals exist for merging or consolidating PSBs.
This stance aligns with the sector’s ongoing focus on:
Strengthening balance sheets
Improving credit growth
Leveraging earlier consolidation gains (2017–2020)
Current FDI Rules Remain Intact
The government also reiterated existing foreign investment limits:
20% FDI cap for PSBs
74% for private-sector banks
Chaudhary highlighted that FDI plays a pivotal role in:
Enhancing long-term capital availability
Accelerating innovation, competition, and employment
Boosting India’s strategic sectors with technology and global best practices
IDBI Bank Disinvestment Proceeding as Cleared
In a separate response, the government reaffirmed that IDBI Bank’s strategic disinvestment will move forward as per the 2021 CCEA approval.
This includes:
Transfer of management control
Shareholding dilution by both the Government of India and LIC
Execution under RBI’s regulatory framework
The process remains a critical milestone in India’s broader banking-sector reforms.
Why This Matters
Stability Over Speculation
By ruling out new mergers for now, the government signals:
A focus on organic growth
Continued strengthening of capital adequacy
Support for PSBs to maintain lending momentum in FY26
Private Sector & Global Investors Take Note
Clear guidance on FDI limits and regulatory continuity helps:
Foreign investors evaluate long-term exposure
Banks plan capital‑raising strategies
Markets price banking-sector reforms more accurately
IDBI Disinvestment: Reform Continues
While PSU consolidation pauses, strategic moves such as IDBI Bank’s sale underline the government’s commitment to:
Modernising the financial system
Reducing state ownership
Deepening private-sector efficiency in banking
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