Core Viewpoint - The Indian government and the Reserve Bank of India are in discussions for a second 'mega-merger' among public sector banks (PSBs) to create a few internationally competitive banks by 2047 [1] Group 1: Historical Context and Structure - The Narasimham Committee-I (1991) proposed a banking structure with 3 or 4 large international banks, 8 to 10 national banks, local/regional banks, and rural banks [2] - The current aggregate balance sheet size of the 12 PSBs is ₹171.42 trillion, with the top three banks (SBI, Punjab National Bank, and Bank of Baroda) accounting for 60% of this total [3] Group 2: International and National Banks - SBI and Bank of Baroda are positioned as potential "international" banks, holding 65.9% of total overseas assets and 63.6% of overseas business among globally operating PSBs [4] - Canara Bank, Indian Bank, and Indian Overseas Bank are identified as potential "national" banks with a combined balance sheet of ₹29.51 trillion, representing 21.5% of total offices and 17.8% of aggregate business [6] Group 3: Regional Banks - Bank of Maharashtra, Punjab & Sind Bank, and Uco Bank are categorized as "regional" players, with their shares in the aggregate business of PSBs at 2.4%, 1%, and 2% respectively [8] - Bank of Maharashtra has seen its net profit increase over tenfold to ₹55.2 billion in FY25, indicating strong performance despite potential resistance to mergers [9] Group 4: Challenges and Regulatory Changes - The overseas operations of PSBs require urgent restructuring due to geopolitical issues and their marginal contribution to financials [5] - Regulatory changes are necessary for PSBs to finance large projects effectively, including enabling long-term and low-cost deposits [14] - The government may consider establishing more Development Financial Institutions to support infrastructure financing [15] Group 5: Future Considerations - To achieve global ranking, PSBs must monitor peer performance and manage the rupee's depreciation to maintain balance sheet integrity [16] - The government may explore cross-mergers between healthy PSBs and private banks as a potential strategy [17]

Core Viewpoint - The executives of top public sector banks (PSBs) advocate for further consolidation in the banking sector, emphasizing the need for at least two Indian banks to be among the top 20 globally to meet the growing demands of the economy aiming for developed nation status by 2047 [1][3][14]. Group 1: Need for Large Banks - The increasing scale of operations and GDP growth necessitates the presence of large banks in India [14]. - Bankers argue that large banks are essential for underwriting significant projects, with current project sizes ranging from ₹8,000 crore to ₹15,000 crore, compared to previous sizes of ₹800 crore to ₹1,500 crore [6][5]. - The consolidation of PSBs during the pandemic has boosted confidence in managing mergers and amalgamations [4][9]. Group 2: Global Positioning - There is a consensus that India should have at least three to four large banks in the top 100 globally based on total business, market capitalization, and asset size [7]. - The need for large banks is further driven by the de-dollarization trend, which will increase the demand for substantial banking entities [6]. Group 3: Operational Efficiency - Larger banks can optimize costs, with the cost-to-income and cost-to-asset ratios improving as banks grow; in India, these ratios are between 1.5-2%, while globally they are around 1% or lower [17]. - Integration of diverse systems and human resources is critical during consolidation, and large banks can better attract and retain specialized talent in areas like risk management and technology [19][20]. Group 4: Cultural and HR Considerations - Cultural integration is vital for successful mergers, with emphasis on harmonizing the workforce and processes [21]. - Transparency and fairness in handling HR issues during consolidation are essential to ensure that all employees feel included in the process [22].