India’s Vision for Global-Scale Banks: Building Financial Giants for a $10-Trillion Economy

India aims to create global-scale public sector banks through a new wave of consolidation, aligning with its Viksit Bharat 2047 vision of becoming a developed economy. The government and RBI seek to build large, tech-driven, professionally managed banks that can fund massive infrastructure and green projects while ensuring financial inclusion, customer focus, and global competitiveness.

India is once again turning its attention to reshaping its banking architecture, this time with a grander vision—a move toward creating global-scale public sector banks (PSBs) that can finance the country’s growing ambitions in infrastructure, manufacturing, and technology. The government’s renewed focus on consolidation signals not just a domestic reform exercise but a strategic bid to position Indian lenders among the world’s financial powerhouses. This drive aligns seamlessly with the nation’s long-term Viksit Bharat 2047 vision—an aspiration to transform India into a developed economy by its 100th year of independence.

At the heart of this initiative lies a simple but profound idea: scale matters. Union Home Minister Amit Shah has urged the banking sector to “change the scale,” while Finance Minister Nirmala Sitharaman has confirmed that preliminary consultations for the next phase of bank consolidation are already underway. The goal is to build an ecosystem where India can nurture several large, world-class banks—institutions capable of meeting the diverse domestic and international financing needs of an economy marching toward the $10-trillion mark.

The Rationale Behind Consolidation

India’s banking sector has historically been fragmented, with multiple PSBs operating under overlapping mandates. The government’s first major consolidation drive between 2018 and 2020 reduced the number of state-owned banks from 27 to 12. This move was intended to create institutions with stronger balance sheets and broader reach. The earlier mergers helped stabilize weaker banks and streamline operations, but they did not significantly alter India’s global banking standing. Together, all 12 PSBs still hold assets worth about ₹171 trillion (roughly USD 1.95 trillion)—a total that places their combined size only slightly above that of the world’s 15th-largest bank.

Now, a fresh wave of mergers is being discussed, involving stronger mid-sized PSBs such as Bank of Baroda, Bank of India, and Bank of Maharashtra. Unlike previous consolidations that largely involved weaker institutions being merged with stronger ones, this phase is envisioned as a proactive step to create globally resilient banks—institutions that can rival the scale and sophistication of financial giants abroad.

During her address at the SBI Banking and Economics Conclave, Sitharaman emphasized that this process will be consultative and gradual. The government and the Reserve Bank of India (RBI) are examining how best to enable sustainable growth while ensuring that the mergers create value rather than disruption. “India requires several strong and world-class banks,” the minister said, stressing that the objective is not merely expansion in size but the creation of stronger, more agile institutions.

Why Scale Matters

Globally, the scale of a financial institution defines its ability to finance large projects, manage risks, and influence markets. India’s largest lender, the State Bank of India (SBI), currently holds assets of about USD 846 billion—ranking 43rd on S&P Global’s 2024 list of the world’s largest banks. To break into the top 10, SBI would need to triple its balance sheet. In contrast, Japan’s Mitsubishi UFJ Financial Group, ranked 10th, has assets exceeding USD 2.6 trillion.

This gap is not merely a matter of pride. Larger banks are better equipped to fund multi-billion-dollar infrastructure projects, support global trade, and compete for capital at favorable terms in international markets. As India invests heavily in green energy, smart cities, and digital infrastructure, the ability of domestic banks to provide large-scale, long-term financing becomes crucial. Big banks can act as the financial backbone of economic transformation, ensuring that India’s development remains self-financed and globally competitive.

Beyond Mergers: The Reform Imperative

Experts caution that merely combining balance sheets will not automatically create global champions. Consolidation must be accompanied by deep reforms in governance, human resources, and technology. Sanjay Kumar Agarwal of CARE Ratings aptly noted that the success of any merger hinges on professional management, reduced political interference, and performance-driven cultures.

Digital transformation will be another decisive factor. Large banks must embrace digital lending, data analytics, and AI-driven risk management to compete effectively in global markets. Without technological agility, size could become a burden rather than a strength.

Capital infusion is also pivotal. Raising the foreign investment limit in PSBs from 20% to 49%—currently under consideration—could open access to international capital, expertise, and innovation. Aligning PSB ownership norms with private banks would help attract strategic investors who can bring in not just funds but global best practices.

Customer Focus and Financial Inclusion

While structural reforms are unfolding at the top, Sitharaman has emphasized the importance of customer-centric banking at the grassroots. She urged PSB officials to interact with customers in their regional languages, suggesting that performance appraisals could include metrics on local engagement. “Language is a powerful bridge between banks and customers,” she remarked, underlining that human connection must complement digital sophistication.

The finance minister also stressed the need for simpler loan disbursal processes and reduced paperwork. “While extending credit, the borrower should not have to repeatedly prove eligibility,” she said, urging banks to make borrowing easier and more transparent. Such measures are crucial to ensuring that consolidation does not distance large banks from the common citizen.

India’s universal banking reforms are also entwined with financial inclusion efforts. Schemes like Jan Dhan have already brought over 560 million new account holders into the formal system—demonstrating that India’s banking expansion is both deep and broad.

Challenges on the Road Ahead

Creating a few globally significant Indian banks will not be an easy task. Mergers of large institutions involve complex integration of technology systems, alignment of corporate cultures, and synchronization of risk management frameworks. Past mergers have shown that stabilization takes time, while employee unions often resist change due to concerns over rationalization and relocations.

Analysts like Hemindra Hazari have warned that “size is not everything.” Larger balance sheets must translate into better profitability, innovation, and governance standards—not just global rankings. Furthermore, merging banks with vastly different cultural and regional strengths may erode the local understanding that smaller banks possess.

There is also the regulatory challenge of preventing the rise of “too big to fail” institutions, whose collapse could threaten systemic stability. Regulators must strike a careful balance between efficiency, competition, and resilience.

Toward a Global Banking Future

Despite the challenges, the strategic benefits of large, globally capable banks are undeniable. These institutions could finance India’s most ambitious projects, champion international trade, and serve as anchors for Indian companies expanding abroad. A strong capital base, professional governance, digital proficiency, and customer orientation will define their global competitiveness.

Finance Minister Sitharaman’s vision, supported by the broader Viksit Bharat 2047 agenda, is clear: India’s economic ascent requires not just growth in size but evolution in capability. Mega banks, if built on robust foundations, can not only drive domestic transformation but also project India’s financial strength across the world stage.

In this sense, India’s journey toward building global-scale banks is not merely about merging institutions—it is about merging ambitions, expertise, and vision into a cohesive, future-ready financial system that powers a truly developed India.