Merger of public sector banks may gain momentum again, roadmap will be released soon

The government's silence over the merger of banks could now be broken after merging 10 public sector banks into four banks in the year 2019. The finance minister, Nirmala Sitharaman, has not said anything about this in general budget 2024-25; however, she had talked about releasing a vision document and strategy for major reforms and changes in the country's financial sector.

Those aware of this discussion within the government say that this strategy of the financial sector will discuss the future expansion of the country's financial sector, regulation, use of technology, training of banking professionals, and what should be their numbers in the public sector and what should be the size of these banks. It is certain that the government does not intend to completely exit the banking sector right now. This form is likely to come out from the Ministry of Finance within the next three to six months.

In 2019, the Ministry of Finance had merged ten public sector banks to form four banks. Earlier, all seven subsidiary banks—Bank of Baroda and Dena Bank—had been merged into the State Bank of India. At the same time, in the general budget of the year 2022, Finance Minister Sitharaman had announced that two public sector banks would be privatized. Now it has not been done too.

Due to the merger, the number of public sector banks has come down from 27 to 12. Despite this, only the State Bank of India comes at 48th rank in the list of the 50 largest banks in the world. It is normal to believe that in such a situation, the structure of Indian banks as it exist today cannot provide the required funds as per the need to realize the goal of a developed India by the year 2047.

Keeping these issues in mind, the Finance Minister had announced to present a vision document for the financial sector. According to officials, the future vision document will be an important step with the aim of preparing India's financial sector for the future.

This document will tell how the financial sector can provide loans for development to all industries, startups, and small and medium industrial units in the country. Along with this, it will also give a roadmap of change in the current role of the financial sector to have the youth employable.

It will tell what are the roles that public sector financial institutions and private sector financial institutions are going to play. This would make foreign investment in the financial sector easier and also point out clear guidelines regarding the use of technology in them. In implementing this roadmap, the RBI is going to have an important role.

There will also be separate roadmaps for other regulatory agencies like SEBI, IRDA etc. The above-mentioned agencies will take steps for future regulation based on this form alone actually.