The Prime Minister’s Office may soon hold a meeting with top government officials to discuss reforms in the public sector banks, as per a report by the Financial Express. The meeting is set to review several proposals from the Department of Financial Services.
As per the report, the Privatisation of two public sector banks may be discussed. The meeting is likely to discuss bank consolidation, more operational autonomy for boards of state-run banks, raising FDI limits in PSBs to 49 percent from the current 20 percent, and supporting these banks’ need for additional capital.
The inter-ministerial discussions on the reforms in PSU Banks is in the final stages, and once the PMO meeting is concluded, political decisions will be taken closer to the Budget. The Central government is planning to execute its agenda between 2026 and 2028, before the 2029 general elections.
India is considering increasing the foreign investment limit in public sector banks (PSBs) from the current 20% to 49% in an effort to strengthen these banks and make it easier for them to raise capital. As per the information available till now, while higher foreign stakes may be allowed, the government’s shareholding in PSBs will not fall below 51%, thereby ensuring their public sector status. A final decision will be taken at the highest level of government.
Finance Minister Nirmala Sitharaman on November 6 had also 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.
As per sources, the government is considering merging Indian Overseas Bank (IOB), Central Bank of India (CBI), Bank of India (BOI), and Bank of Maharashtra (BoM) with larger banks such as Punjab National Bank (PNB), Bank of Baroda (BoB), and State Bank of India (SBI).
The latest merger proposal also follows NITI Aayog’s recommendation to restructure or privatise smaller PSBs such as IOB and CBI. The government’s think tank had earlier suggested keeping only a few large state-run banks — SBI, PNB, BoB, and Canara Bank — while merging or reducing the government’s stake in the rest. The current plan builds on those earlier recommendations but aligns them with today’s conditions. With fintech and private banks growing rapidly, the idea is to position public sector banks strategically instead of spreading them too thin.
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