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Government Denies PSB Merger Plans Amid Consolidation Rumors

The government has officially stated it is not considering any merger or disinvestment plans for public sector banks right now. This clarification comes despite previous reports suggesting a major consolidation blueprint was in the works. The Finance Minister highlighted the significant improvement in the banks' health, with bad loans dropping dramatically over the past decade. The focus remains on recovery efforts and transparency regarding wilful defaulters.

Key Points: Govt Says No Proposal for PSB Merger or Disinvestment

  • Minister Pankaj Chaudhary informed Parliament no PSB merger or disinvestment is currently planned
  • This denies earlier reports of a blueprint to consolidate 12 banks into four by FY27
  • Gross NPAs in PSBs have sharply fallen from 9.27% in 2016 to 2.51% in June 2025
  • The slippage ratio for fresh bad loans has also improved significantly to 0.9%
2 min read

No proposal for merger or disinvestment of public sector banks: Govt

Finance Ministry clarifies no plans for public sector bank mergers or disinvestment, citing improved asset quality and declining NPAs as key achievements.

"Presently, no proposal on merger or disinvestment of Public Sector Banks (PSBs) is under consideration of the Government. - Pankaj Chaudhary, MoS Finance"

New Delhi, Dec 2

No proposal on merger or disinvestment of public sector banks (PSBs) is under consideration of the government at the moment, the Parliament was informed on Tuesday.

Replying to a question in the Rajya Sabha on whether the government has plans to disinvest four PSBs or to merge with larger banks by 2026, Minister of State for Finance, Pankaj Chaudhary, said: "Presently, no proposal on merger or disinvestment of Public Sector Banks (PSBs) is under consideration of the Government."

There were reports claiming that the government is working on a PSB consolidation blueprint that could reduce the number of state-owned lenders from 12 to just four in FY27. The proposal reportedly planned to strengthen balance sheets, improve operational efficiency and create globally competitive banking institutions.

Chaudhary also informed the house that the gross non-performing assets (NPAs) ratio in public sector banks (PSBs) has declined from 9.27 per cent in March 2016 to 2.58 per cent in March 2025, and further to 2.51 per cent in June.

Similarly, the slippage ratio -- fresh accretion of NPAs as a percentage of standard advances -- declined from 7.5 per cent in March 2016 to 1.0 per cent in March 2025, and further to 0.9 per cent in June 2025, he added.

Further, recovery in written-off loans is an ongoing process, and banks continue pursuing their recovery actions initiated against borrowers under the various recovery mechanisms available to them.

The minister further said that the RBI has advised lenders to submit the list of wilful defaulters to all Credit Information Companies (CICs) on a monthly basis, and CICs are required to display the same on their respective websites. The details of wilful defaulters of Rs 25 lakh and above is available in the public domain and can be accessed at the following URL of credit information companies, registered with and regulated by the RBI.

- IANS

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Reader Comments

P
Priya S
The reduction in NPAs is the real story here! From 9.27% to 2.5% is a massive improvement. Kudos to the banks and the recovery mechanisms. This strengthens the system more than just merging banks.
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Aman W
While stability is welcome, we must think long-term. Having 12 PSBs might lead to redundancy and inefficiency. A few strong, globally competitive banks could serve the nation better. Hope they reconsider after the elections.
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Sarah B
The transparency on wilful defaulters is a great step. Naming and shaming those who take loans and don't repay is crucial. Hope this deters future defaults. 👏
K
Karthik V
Good move to put the merger rumors to rest. My father works in a PSB and the anxiety was real. Now focus should be on improving digital services and customer experience. The SBI app still needs work!
M
Meera T
Respectfully, I disagree with the decision to halt consolidation. We have too many banks with overlapping functions. Mergers could reduce operational costs and those savings could be passed to customers via lower charges. This feels like a missed opportunity for reform.
D
David E
The numbers on recovery are impressive. It shows the system is working. As an investor, stability in the banking sector is key for economic growth. This clarity

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