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The Finance Ministry may constitute a committee to examine the next phase of public sector bank consolidation

ICICIdirect Research 19 Jun 2026 DISCLAIMER

News: As per media reports, the Finance Ministry may constitute a committee to examine the next phase of public sector bank consolidation, with discussions reportedly underway on reducing the number of state-owned banks from 12 to 5 larger entities. The proposed committee is expected to be headed by former DFS Secretary M. Nagaraju and may also evaluate increasing the foreign investment limit in PSBs to 49% from the current 20%, while retaining the government's minimum 51% ownership. Currently, foreign investment in PSBs is capped at 20% through the government approval route, with individual foreign shareholder voting rights restricted to 10%.

View: The move aligns with the Union Budget FY27 proposal on "Banking for Viksit Bharat", which aims to improve efficiency, governance, competitiveness and capital strength of public sector banks. While no specific merger structure has been announced, the proposal could pave the way for a new round of consolidation

Impact: Neutral

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