FM Nirmala Sitharaman Says Government in Talks with RBI, Banks on Consolidation

Finance Minister Nirmala Sitharaman confirmed that the government has initiated discussions with the Reserve Bank of India (RBI) and public sector banks on the need to build larger and stronger banks in India. 

She said that significant groundwork is underway to create a conducive environment for banks to grow and consolidate if needed. Her comments come amid renewed market buzz around public sector bank consolidation.

Work in Progress on Banking Ecosystem

The finance minister emphasised that before taking any decision on bank mergers, the focus should be on developing an enabling ecosystem. She noted that India already has a banking environment but stressed the need for timely reforms to help banks expand. Sitharaman added that the government, RBI, and banks are jointly assessing steps to strengthen the sector’s resilience and competitiveness.

Need for Local Connect and Simplicity in Banking

Highlighting the importance of customer relationships, Sitharaman urged banks to maintain personal engagement despite technological advancements. She said that person-to-person contact and communication in local languages are vital for better customer service. 

The minister pointed out that due to current HR policies, many PSU bank staff lack knowledge of regional languages, which weakens their local connection. She urged banks to recruit and post employees who can interact effectively with customers in their local language.

Sitharaman also called for simplifying lending procedures and ensuring that the credit assessment process is handled internally rather than being outsourced. She cautioned banks against burdening borrowers with excessive paperwork.

Balancing Technology and Risk

The minister also spoke about the responsible use of artificial intelligence (AI) in banking. She noted that while AI can enhance efficiency and productivity, it poses potential ethical and national security risks if misused.

Also Read: Govt to Address F&O Trading Challenges, Not Shut It Down: FM Sitharaman!

Conclusion

Nirmala Sitharaman’s remarks underline the government’s vision of building a stronger, more customer-friendly, and technologically secure banking system. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a private recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.