Bank Merger or Privatisation? Govt announces to set up High-Level Committee for Banking Reforms
High-Level Committee for Banking Reforms: While introducing the Union Budget 2026, the Union Finance Minister Smt. Nirmala Sitharaman said today that Indian banks are now in a strong position, with healthy balance sheets, high profits, and better control over bad loans. With asset quality improving and coverage crossing 98%, the sector is seen as stable and ready for the next phase of growth.
“In the financial sector, the Indian banking sector today is characterised by strong balance sheets, historic highs in profitability, improved asset quality and coverage exceeding 98%,” Sitharaman said. “At this juncture, we are well placed to futuristically evaluate the measures needed to continue on the path of reform-led growth of this sector.”
To keep reforms on track, the government will set up a high-level committee on banking for Viksit Bharat. This group will review the entire banking system and suggest changes to support India’s next stage of economic growth. It will also focus on financial stability, inclusion, and protecting consumers.
Also Read: Big Bank Merger Ahead! Union Bank and Bank of India to be merged
The Union Budget 2026 also mentioned about NBFCs (non-banking finance companies). A vision has been set with clear goals for more credit and better use of technology. To improve efficiency in public sector NBFCs, the government plans to restructure them into larger, stronger entities like the Power Finance Corporation and the Rural Electrification Corporation.
For foreign investors, the rules on non-debt investments under foreign exchange laws will be reviewed. The aim is to make them more modern and user-friendly, in line with India’s changing economic priorities.
Also Read: Countdown Begins for IDBI Bank Privatisation as Govt Invites Financial Bids
What does this announcement mean in the Union Budget 2026?
This means that the Government may merge or privatise public sector banks. Earlier, the government had announced that only four public sector banks would remain and the rest would be merged or privatised. The Finance Minister herself had also stated that the banks would be merged. Finance Minister Nirmala Sitharaman on November 6 confirmed that the government has begun work on the next phase of public sector bank (PSB) consolidation. She said India now needs several big, world-class banks to support the requirements of a fast-growing economy.
Speaking at an event in Mumbai, the minister said discussions have already started with the Reserve Bank of India (RBI) and various banks. “Work has commenced. We are discussing with the RBI and banks. This is not just about amalgamation. We need an environment where banks can operate and grow,” she said.
Also Read: Big Bank Merger Ahead! Union Bank and Bank of India to be merged
Privatisation of Banks Will Not Harm Financial Inclusion
Earlier, while speaking at the Delhi School of Economics, Sitharaman said the privatisation of banks will not affect financial inclusion. She explained that keeping banks fully under government control for decades had prevented them from becoming professional institutions, often forcing the government to infuse capital repeatedly. Finance Minister Nirmala Sitharaman on Tuesday said that privatisation of state-owned banks would not hurt financial inclusion and national interest. She said that the bank nationalisation done in 1969 has not yielded the desired result as far as financial inclusion was concerned. Click here to read this news in detail.
Also Read: Big Bank Merger Ahead! Union Bank and Bank of India to be merged
