Government Plans Major Scale-Up for Public Sector Banks under Viksit Bharat Vision

The Government of India is planning an ambitious initiative to majorly scale up Public Sector Banks (PSBs) under its Viksit Bharat Vision 2047, unveiled at the PSB Manthan 2025 conclave. This vision aligns with India’s goal of becoming a developed economy by 2047 and aims to position at least two PSBs among the world’s top 20 banks.

Government Plans Major Scale-Up for Public Sector Banks

As part of this strategy, the government is actively considering the merger of smaller PSBs such as Indian Overseas Bank, Central Bank of India, and Bank of Maharashtra with larger banks like Punjab National Bank, Bank of Baroda, and State Bank of India by FY27. These merger discussions are currently at the Cabinet level and will be reviewed by the Prime Minister’s Office (PMO) before formal announcements are made.

Goals and Strategic Approach

The Viksit Bharat Vision focuses on transforming PSBs from institutions focused primarily on stability into champions of growth, innovation, and leadership. Key objectives include:

Achieving global competitiveness with PSBs having large balance sheets and international presence.

Supporting traditional sectors such as agriculture, MSMEs, and infrastructure while also enabling emerging industries like renewable energy, electric mobility, semiconductors, green hydrogen, and digital technologies.

Facilitating financing for mega infrastructure and international business projects.

Critical Reforms and Action Plans

To realize these goals, reforms are underway, including enhanced corporate governance, increased operational autonomy, digital transformation emphasizing AI and big data, and strengthening cybersecurity and risk management. Workforce upskilling and customer-centric innovations are also integral for the transformation.

Customer and National Benefits

The merger and strengthening of PSBs aim to provide:

• Improved customer service with expanded digital and rural outreach.
• Enhanced financial inclusion and resilience against global shocks.
• Superior risk control and regulatory compliance.
• Positioning Indian PSBs as global financial powerhouses.

Challenges and Future Path

Though the merger strategy promises scale and efficiency, challenges related to integration, technology, and workforce management will need careful navigation. The discussions at high government levels signify the critical importance of this initiative for India’s economic future.

The envisaged merger of smaller PSBs with larger banks by FY27, combined with broad reforms under the Viksit Bharat Vision 2047, aims to create globally competitive, digitally-enabled, and robust public sector banking institutions, playing a pivotal role in powering India’s journey to become a developed economy by 2047.