India’s Banking Ambitions: Why Bigger Banks Are Key to the $30 Trillion Dream

Image Source : Business Standard

India is accelerating efforts to build larger, globally competitive banks as part of its long-term vision to scale the economy to $30 trillion by 2047. With credit expansion seen as a critical lever, policymakers are pushing for structural reforms, mergers, and new licenses to create institutions capable of funding large-scale infrastructure and industrial growth.

Key Highlights:

Bank lending currently stands at 56% of GDP; to meet the 2047 target, it must rise to nearly 130%.
State Bank of India remains the only Indian lender with global heft; the government aims to create four or five more such institutions.
Larger banks are better equipped to handle complex risks and fund mega projects across manufacturing, services, and infrastructure.

Challenges and Roadblocks:

Legacy non-performing assets (NPAs) continue to constrain credit growth, despite asset reconstruction efforts.
Public sector banks still face governance issues and limited autonomy, slowing balance sheet expansion.
The proposal to allow large corporate groups into banking has sparked concerns over conflicts of interest and cronyism.

Strategic Moves Underway:

The government is considering new banking licenses and relaxing foreign ownership norms to attract capital.
Mergers and privatization of PSU banks are being explored to streamline operations and boost efficiency.
Fintech integration and digital transformation are expected to play a pivotal role in modernizing the sector.

Sources: Invezz, Bloomberg, Yahoo Finance, Economic Times, GLG Insights, Vajirao Institute (July 2025)