Canara Bank, UCO Bank, IOB: Is the roadmap being laid out for merger of public sector banks? Check what finance minister said

However, a high-level committee on banking for Viksit Bharat, proposed in the Budget 2026-27, will look into the topic and other aspects, she said.

"I am not familiar with any roadmap... There isn't one," Sitharaman said in a media briefing after her post-Budget customary address to the Board of the Reserve Bank of India.

"Bank consolidation was not a subject here, nor was it a subject before the Budget, but the committee, which is now being appointed, once the terms of reference are given, will look into every aspect of how to strengthen Indian banking," she said.

In the Budget, Sitharaman proposed setting up a 'High Level Committee on Banking for Viksit Bharat' to comprehensively review India's banking sector and align it with the country's growth goals while safeguarding financial stability, inclusion, and consumer protection.

The High-Level Committee on Banking for Viksit Bharat is expected to draw up a blueprint to create mega-lenders capable of meeting the financing needs of a developed India.

"I propose setting up a 'High Level Committee on Banking for Viksit Bharat' to comprehensively review the sector and align it with India's next phase of growth, while safeguarding financial stability, inclusion, and consumer protection," she had said in the Budget speech on February 1.

Budget 2026: Other key announcements

To achieve scale and improve efficiency in the public sector NBFCs, as a first step, the Budget also proposed to restructure the Power Finance Corporation (PFC) and Rural Electrification Corporation (REC).

REC is a subsidiary of state-owned power sector lender Power Finance Corporation (PFC). Both entities play a key role in funding power generation, transmission, and distribution projects.

In March 2019, PFC completed the acquisition of a majority stake in REC Ltd by transferring ₹14,500 crore to the government.

PFC acquired 103.94 crore shares, constituting a 52.63% stake held by the government in REC, along with the management control. The acquisition price was worked out to ₹139.50 per share. This stake acquisition came following the in-principle approval from the Cabinet Committee on Economic Affairs.

What the RBI Governor said

Commenting on the banking sector, RBI Governor Sanjay Malhotra said banks are adequately capitalised and can sustain credit growth for the next 4-5 years, which will further support the economic needs.

Malhotra said the deposit growth rate is now keeping pace with the increase in credit growth.

On the issue of moderation in net FDI, Malhotra said gross FDI has been increasing.

Last year, he said, "It increased by about 14-15%. Even this year, gross FDI has increased, and the growth rate is also high. It's because of repatriations of those people who had done earlier FDI. It has gone out. The net (FDI) has decreased."

Similarly, the RBI Guv said, 'Now they (Indians) are feeling stronger and bolder because of the various measures taken domestically to strengthen our economy.'

They are going and investing more abroad, and because of that, the net FDI is not as high as we would like.

PSB merger in 2019

In August 2019, in what was billed as the largest consolidation exercise in India’s banking sector, the government announced four major mergers among public sector banks, reducing their total number to 12 from 27 in 2017. The move was aimed at creating globally competitive, larger state-owned lenders.

United Bank of India and Oriental Bank of Commerce were decided to be merged with Punjab National Bank (PNB), making the proposed entity the second largest public sector bank.

Making the announcements, Finance Minister Nirmala Sitharaman said Syndicate Bank will be merged with Canara Bank, while Allahabad Bank will be amalgamated with Indian Bank.

Similarly, Andhra Bank and Corporation Bank will be consolidated with Union Bank of India.

In place of fragmented lending capacity with 27 PSBs in 2017, now there will be only 12 state-run banks post-consolidation, Sitharaman said.

The finance minister also said banks will be provided adequate capital.

Earlier in 2019, Dena Bank and Vijaya Bank were merged with Bank of Baroda. Prior to this, the government had merged five associate banks of SBI and Bharatiya Mahila Bank with the State Bank of India.