The Union finance ministry on Friday constituted the much-awaited high-level committee to review the country’s banking sector, tasking it with recommending structural, regulatory and legislative reforms to make banks globally competitive and better equipped to meet the financing needs of a developed economy.
The High Level Committee on Banking for Viksit Bharat — first announced by Finance Minister Nirmala Sitharaman in the Union Budget 2026-27 — will be chaired by former Central Vigilance Commissioner (CVC) Suresh N Patel, who has over three decades of experience in the banking sector. Patel was managing director and chief executive officer of Andhra Bank and an executive director at Oriental Bank of Commerce.
Its members include Reserve Bank of India (RBI) Deputy Governor Shirish Chandra Murmu, former Indian Bank Managing Director and Chief Executive Officer Padmaja Chunduru, and former RBI Deputy Governor N S Vishwanathan.
The Joint Secretary (Banking) in the Department of Financial Services will be the member secretary. The committee has been given six months, until April 2027, to complete its work, according to a finance ministry statement.
While the committee’s terms of reference do not explicitly call for recommendations on banking consolidation, Shaktikanta Das, principal secretary-2 to the prime minister, speaking at the Business Standard BFSI Insight Summit in Mumbai on Tuesday, had said India must build banks and financial institutions with the scale, resilience and international presence to compete with the world’s leading lenders. His remarks signalled the case for further consolidation among public sector banks (PSBs).
A key part of the panel’s mandate is to review the priority sector lending (PSL) framework and the Lead Bank Scheme. It will assess their relevance, effectiveness and coordination in delivering inclusive and balanced credit, with greater emphasis on data-driven lending and evolving economic priorities.
In May, the Economic Advisory Council to the Prime Minister called for a review of the PSL framework, arguing that it should prioritise social equity by directing credit towards small and marginal farmers, micro enterprises and weaker sections, rather than retaining broad sectoral classifications that have expanded over time.
Another key focus will be to assess the capital requirements of banks, development financial institutions (DFIs) and non-banking financial companies (NBFCs), and recommend funding sources and mechanisms to support credit growth.
Sachin Sachdeva, vice-president and sector head-financial sector ratings, Icra, said the review of long-term capital requirements and funding mechanisms would be particularly important in enabling banks and financial institutions to sustain strong credit growth.
“Adequate capital, competitive funding and an enabling regulatory framework, underpinned by appropriate prudential safeguards, will be critical to support India’s rising investment requirements,” he added.
The committee will also examine differences in the cost of capital for businesses and suggest policy measures to boost private investment and support sustainable economic growth.
It will review the existing regulatory and legal frameworks governing commercial banks, regional rural banks and cooperative banks, with a view to improving efficiency and ease of access and operations. The panel will also assess existing banking practices and prudential norms against global best practices and recommend a roadmap for building globally competitive Indian banks.
The exercise comes as India seeks to expand the scale and reach of its banking system while meeting the financing requirements of a growing economy. Banks’ ability to mobilise capital, manage risks and extend credit efficiently will be critical to funding investment and supporting the government’s ambition of a Viksit Bharat by 2047.
The committee will also prepare a roadmap for the adoption of artificial intelligence (AI) and digital innovation in banking institutions, alongside safeguards against cyber risks. It will recommend measures for talent acquisition and capacity building to prepare the banking workforce for technological change.
The terms of reference also allow the government to refer additional matters to the committee.
Kuntal Sur, partner and leader, Financial Risk and Regulation, PwC India, said the review would be critical as the banking sector expands to address next-generation credit requirements, strengthen risk management, develop innovative financial products and accelerate digital transformation.
“The resulting structural reforms are expected to not only strengthen capital efficiency but also create an inclusive financial ecosystem capable of powering India’s long-term macroeconomic ambitions,” Sur added.
Industry expectations are that the committee will use the opportunity to revisit several long-standing structural and regulatory issues in the banking sector. These include the debate over allowing corporates to enter banking, the existing 26 per cent cap on voting rights for large shareholders, and the need to streamline the approval process for foreign direct investment (FDI) in banks.
The panel is also expected to examine ways to attract greater domestic and foreign capital into the banking system to support the creation of larger lenders capable of financing India’s growing economy. This could involve reconsidering restrictions on voting rights for large shareholders and exploring the possibility of allowing large NBFCs to convert into banks, subject to appropriate regulatory safeguards.
The banking sector has seen a series of large foreign investments in recent years. These include Fairfax Financial Holdings’ proposed acquisition of a 60.72 per cent stake in IDBI Bank for ₹52,878 crore ($5.56 billion), Emirates NBD’s acquisition of a 60 per cent stake in RBL Bank for around ₹26,016 crore ($2.75 billion), and Japan’s SMBC acquiring a 20 per cent stake in Yes Bank for approximately ₹13,483 crore ($1.6 billion).
India’s banking sector currently comprises 12 public sector banks, 21 private sector banks, 11 small finance banks and five payments banks.
Since the turn of the millennium, the RBI has issued only four universal banking licences -- to Kotak Mahindra Bank, Yes Bank, Bandhan Bank and IDFC Bank, which later became IDFC First Bank -- even as private sector lenders have steadily expanded their footprint and reduced the dominance of state-owned banks. Last year, the banking regulator approved AU Small Finance Bank’s application to convert into a universal bank.
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