Now Reading: EAC-PM proposes fewer, equal-sized banks in India
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EAC-PM proposes fewer, equal-sized banks in India
The Economic Advisory Council to the Prime Minister has recommended consolidating Indian banks into a smaller number of equal-sized lenders without reducing competition. In a paper released Tuesday night, the council noted…
The Economic Advisory Council to the Prime Minister has recommended consolidating Indian banks into a smaller number of equal-sized lenders without reducing competition. In a paper released Tuesday night, the council noted that while the banking industry is not highly concentrated, individual bank market shares vary widely from 20% to below 1%.
India had 124 scheduled commercial banks as of March 2026. Public sector banks, led by State Bank of India with 22% of deposits and 20% of credit, hold 56% of deposits and 53% of credit. Private sector banks account for 35% of deposits and 39% of credit, while foreign banks hold 5% of deposits and 3% of credit.
The paper also found that the banking sector's overall technical efficiency stood at 87.7% over FY15-FY26. Gross NPAs fell to 1.68% in June 2026 from 11.5% in March 2018. Credit growth reached 19.3% in July 2026, compared with 9% in FY15.
Indian Opinion Analysis
The EAC-PM's proposal revives a long-running debate on optimal bank size in India. The government merged 10 state-run lenders into four in 2020, reducing the number of PSBs from 27 to 12. Those mergers aimed at building scale to compete with private peers. The new recommendation goes further, suggesting the system should have only a handful of banks of roughly equal heft. That would require more consolidation, likely involving SBI's dominant share being addressed alongside mergers among mid-sized PSBs. The real constraint is political: large mergers mean job rationalisation and branch closures, which state governments resist. The next budget or the finance ministry's mid-year review may signal whether this paper moves from advice to policy.
Source: livemint.com
This brief was synthesised by AI from the source linked above.
