SBI Chairman Backs Another Round of PSU Bank Mergers, Says “Consolidation Makes Sense”

Public Sector Bank stocks surged on Monday after reports of a possible new merger wave surfaced, with State Bank of India (SBI) Chairman CS Setty affirming support for government-led consolidation. The Nifty PSU Bank index traded 1.1 percent higher, driven by renewed optimism over the proposed restructuring expected around April–May 2026.

Setty stated that India’s banking ecosystem still has several state-owned lenders operating below optimal scale. He emphasized that further rationalization could strengthen the sector’s stability and competitiveness. “Some further rationalisation might make sense. There are still some smaller, sub-scale banks,” Setty noted. “If another round happens, it may not be a bad idea.”

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The remarks align with the government’s long-term vision of building a stronger financial ecosystem to support India’s economic growth ambitions. As the country sets its sights on becoming a developed economy by 2047, the need for greater lending capacity is becoming increasingly evident. Setty highlighted that bank financing must rise to 130 percent of India’s GDP from the current 56 percent to meet the nation’s infrastructure and industrial development goals, which align with the government’s projected $30 trillion GDP target.

SBI, which controls almost one-fourth of India’s Rs 194-lakh-crore loan market, is uniquely positioned to gain from consolidation in the banking sector. Currently, only SBI and HDFC Bank feature among the world’s top 100 banks by assets. Setty acknowledged that larger balance sheets and stronger capital efficiency would help state-owned banks compete effectively with private-sector peers.

The SBI Chief also noted growing competition in corporate and project lending, warning that banks must adapt to changing market dynamics. “There are many banks looking to build corporate portfolios, but only a limited number of large corporates,” he said. Policymakers, according to industry observers, are considering a blueprint for the next wave of mergers, and SBI’s endorsement signals broad institutional readiness for consolidation aimed at creating globally competitive Indian lenders.

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