India wants bigger banks to match global giants—But size alone doesn't assure better outcomes

Group 1 - The Indian government is considering increasing the size of public sector banks (PSBs) through consolidation, contrary to the idea that smaller banks may be more effective [1][4] - The aspiration for Indian banks to rank among the top global banks reflects a broader desire for India to ascend in the global economic hierarchy [2] - Size alone does not guarantee effective service delivery or financial inclusion, which are critical for both economic growth and banking efficiency [3] Group 2 - Currently, only two Indian banks, SBI and HDFC Bank, are in the top 100 global banks by total assets, with SBI ranked 43rd and needing to triple its size to enter the top 10 [5] - The argument for larger banks is that they can better fund infrastructure projects and meet the credit needs of large corporates, but this perspective is flawed [6] - Banks are not ideally suited for long-term infrastructure financing due to asset-liability mismatches, and the economy has diversified financing options beyond traditional bank loans [7][8] Group 3 - Large banks are not necessarily more stable; their failure could have systemic implications, making them "too big to fail" and potentially requiring government intervention [9] - Mergers in the banking sector should be based on commercial viability rather than government mandates [10]