Finance Minister Nirmala Sitharaman Announces Plans for World-Class Banking Institutions in India

Mumbai:

Finance Minister Nirmala Sitharaman declared on Thursday that India requires large-scale, world-class banking institutions, confirming ongoing discussions with the Reserve Bank and banking sector leaders on this matter.

Speaking at the 12th SBI Banking and Economics Conclave 2025, Sitharaman urged financial institutions to expand and strengthen credit availability to the industrial sector. She expressed confidence that demand stimulated by GST rate reductions would catalyze a beneficial investment cycle.

Emphasizing India's need for numerous substantial, globally competitive banks, she stated, "The government is actively addressing this issue and initiatives have already begun. We are engaged in consultations with the RBI and various banking institutions."

As part of its privatization strategy, the government divested its controlling 51 percent stake in IDBI Bank to Life Insurance Corporation of India (LIC) in January 2019.

Following this, both the government and LIC announced their intention to strategically divest their ownership in IDBI Bank.

In October 2022, both stakeholders solicited Expressions of Interest (EoI) from potential investors for IDBI Bank's privatization, offering a combined 60.72 percent stake—comprising 30.48 percent government ownership and 30.24 percent LIC holdings.

The Department of Investment and Public Asset Management (DIPAM) received multiple EoIs for IDBI Bank in January 2023.

Facilitating IDBI Bank's sale, the Securities and Exchange Board of India (Sebi) approved in August 2025 the reclassification of Life Insurance Corporation from promoter to public shareholder upon completion of the strategic divestment.

Additionally, the government has undertaken consolidation of public sector banking institutions. In a major banking sector restructuring effort, the government announced four significant public sector bank mergers in August 2019, reducing their total number from 27 in 2017 to 12.

Effective April 1, 2020, Punjab National Bank absorbed United Bank of India and Oriental Bank of Commerce; Canara Bank merged with Syndicate Bank; Indian Bank amalgamated with Allahabad Bank; and Union Bank of India consolidated with Andhra Bank and Corporation Bank.

In 2019, Bank of Baroda integrated Dena Bank and Vijaya Bank. Prior to these consolidations, the government had merged five SBI associate banks and Bharatiya Mahila Bank with the State Bank of India.

Sitharaman highlighted that infrastructure development remains the government's primary focus, with capital expenditure having increased fivefold over the past decade.