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]