PSU Bank Merger 2.0: Govt Starts Talks With RBI, PSBs to Build “World-Class” Mega Lenders; Next Consolidation Wave Likely in 2026

The government has initiated discussions with the RBI and public sector banks on the next round of PSU bank consolidation, with policymakers aiming to create larger, globally competitive lenders aligned with the Viksit Bharat 2047 agenda. Finance Minister Nirmala Sitharaman has signalled that preparatory work has begun and reiterated the need for “many big, world-class banks”. India currently has 12 PSBs after earlier merger rounds (including the 2019–20 consolidation that reduced the count from 27 in 2017), and the renewed push is being justified on the need for scale to fund large projects and improve global competitiveness. The article also notes privatisation work continues in parallel, with

’s stake sale targeted for completion by March 2026, according to DIPAM commentary cited. The debate is supported by strong PSU bank profitability trends: the 12 PSBs reported combined net profit of ₹93,675 crore in H1 FY26 (up 10% YoY), with FY26 profits projected to cross ₹2 lakh crore after a record ₹1.78 lakh crore in FY25. If discussions translate into decisions, 2026 could see another reshaping of India’s PSU banking landscape via fewer, larger entities. Source: News 18 No Recommendations