Informist, Friday, Jul. 25, 2025

--RBI Malhotra: Up to govt to take call on PSU bank mergers
--RBI Malhotra: No proposal to allow corporates to get banking licenses
--RBI Malhotra: No proposal to review 26% shareholding norms in banks

NEW DELHI – The decision on whether to go ahead with another round of public sector bank mergers or not is for the government to make, Reserve Bank of India Sanjay Malhotra said at FE Modern BFSI Summit Friday. "If they ask for our views we will certainly share our views with them," he said.

"We need to do multiple things, whether the public sector banks should be merged or not that is for the government to decide. Government had earlier merged banks with good results, lot of public sector banks were merged, regional rural banks were recently merged. Government will take a call as to whether it makes economic sense to merge more banks.

In May 2024, Informist had reported that the government may rethink the plan to privatise two public sector banks and may contemplate merging more PSU banks. In the Budget for 2021-22 (Apr-Mar), Finance Minister Nirmala Sitharaman had announced plans to privatise two public sector banks.

The Narendra Modi government has carried out mammoth PSU bank mergers in recent years. Not long after kick-starting its second term, the government had in August 2019, announced a mega merger plan for 10 public sector banks. Effective Apr. 1, 2020, Oriental Bank of Commerce and United Bank of India were merged into Punjab National Bank, Andhra Bank and Corporation Bank were merged into Union Bank of India, Syndicate Bank was merged with Canara Bank, and Allahabad Bank was merged into Indian Bank.

Prior to this, five associate banks of State Bank of India--State Bank of Bikaner and Jaipur, State Bank of Mysore, State Bank of Travancore, State Bank of Hyderabad, and State Bank of Patiala--along with Bharatiya Mahila Bank were merged with State Bank of India in 2017.

Malhotra said that currently there is no proposal to allow corporates whether through non-bank financial companies or as an individual company to get a banking license. "NBFCs can become small finance banks, they can become universal banks but the eligibility criteria for NBFC or a company is not very different, it is the same. We have our concerns, if the same group, industrial house or a corporate group is doing financial activities and real economy activities within the same group, there is an inherent conflict of interest with the group actually dealing with the money of depositors and those concerns are valid and continue to remain," he said.

To a query on possibility of relaxing limitation of 26% voting rights in private sector banks, Malhotra said, the requirement is because RBI would like no individual person to exercise undue control over the management of banks which is dealing with depositors' money. End

Reported by Sagar Sen

Edited by Ashish Shirke

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