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There is no proposal before the government to reduce its holding in public sector banks below 51%, said M Nagaraju, Secretary, Department of Financial Services, under the Ministry of Finance.
“They will continue to be majority-owned by the government, because there is a public interest in the government owning a majority in public sector banks,” Nagaraju told CNBC-TV18 at the Banking Transformation Summit. He stressed their critical role in serving neglected and underserved sectors.
At the same time, Nagaraju underlined the need for both bigger and more banks to meet the growing needs of India’s large population and expanding economy. “For a country of our size, this kind of population, this kind of trade growth potential, we also require more banks. On that, there is no debate. The government is very clear that we require both more banks and bigger banks. They are not contradictory; they actually go together,” he said.
He pointed out that about 300–350 million people still need to be fully integrated into the financial system, creating a massive opportunity for the sector. “Imagine that number of people being formalised, and the kind of credit and banking business that will emerge. The scope is huge for new banks also,” he added.
On consolidation, Nagaraju clarified that it remains a long-term goal. While regional rural banks have already been merged under the “one RRB, one state” model, the broader vision looks ahead to 2047, when India completes 100 years of independence. “At that point of time, we need to have larger banks, bigger banks, banks with global influence, so that India is able to play a bigger role in the global markets,” he said.
Looking ahead, the government is also focused on raising capital for four banks this year to meet SEBI norms and support further lending. Nagaraju emphasised that expansion must be balanced with prudence. “The first fundamental principle of a banker is to ensure our banks are not overleveraged, that we are healthy, and that our capital base is protected,” he said.
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