Banking reforms: Budget 2026 eyes PSB mergers & global investor inflow

New Delhi: The central government may present a big roadmap for the banking sector in the upcoming Budget 2026-27. Finance Minister Nirmala Sitharaman can decide the direction of further integration of government banks, which aims to build big and strong banks that can compete globally. At present, very few Indian banks are among the top banks in the world.

The government has already made it clear that big banks are necessary to strengthen the banking sector. Under this vision, government banks have been integrated in the last few years. In the year 2017, where the number of government banks was 27, it has now come down to 12. This move has strengthened the financial position of banks and increased their lending capacity. Now in the Budget 2026, the government can present a roadmap to take this process forward.

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SBI becomes country's strongest bank

State Bank of India is the biggest example of the government's banking reform policy. In the year 2017, its associate banks were merged, which increased both the size and strength of SBI. Today, SBI's asset base is about Rs 44 lakh crore and it has more than 22,500 branches and over 58,000 ATMs across the country. Globally too, SBI is the only bank in India which is included in the list of top 50 banks.

Many consultancies, including Deloitte, believe that to increase investment in the banking sector, it is necessary to change the rules related to voting rights. Currently, under the banking law, the promoter's voting rights are limited to a maximum of 26 percent, irrespective of their stake. Because of this reason, large foreign investors distance themselves from investing in Indian banks. If this rule is reconsidered in Budget 2026, then large foreign capital may come into the banking sector.

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If the government succeeds in building big and world-class banks, then the common customers will get direct benefit from it. Strong banks will be more secure and the availability of credit will also be better. There may also be new opportunities for investors in the banking sector. Overall, Budget 2026 can prove to be important in making India's banking system more robust and reliable.

According to media reports, the government is considering incorporating some mid-size government banks into big banks. It is being said that Indian Overseas Bank, Central Bank of India, Bank of India and Bank of Maharashtra can be merged with the country's big banks State Bank of India, Punjab National Bank and Bank of Baroda. A draft record of discussion has been prepared in this regard.