SBI backs another wave of bank mergers

State Bank of India Chairperson Challa Sreenivasulu Setty
| Photo Credit:
SHASHANK PARADE

The State Bank of India (SBI) has expressed openness to potential consolidation among government-owned lenders as authorities consider measures to enhance financial capacity and foster economic expansion in the rapidly growing nation.

“Further rationalization could be beneficial considering several smaller, less dominant institutions still operate in the sector,” stated Challa Sreenivasulu Setty, chairman of the country’s largest banking institution, during a discussion. “Another consolidation phase may prove advantageous,” he added.

Headquartered in Mumbai, SBI commands approximately 25% of India’s ₹194 lakh crore ($2.18 trillion) lending market. A decade of mergers has reduced public sector banks to 12 entities, positioning them against private competitors like HDFC Bank Ltd and global institutions including HSBC Holdings Plc. With assets totaling $787 billion, SBI operates through more than 22,500 branches and serves over half a billion customers.

Government discussions about creating larger public banks align with infrastructure financing requirements for India’s developmental objectives. Prime Minister Narendra Modi aims to elevate the nation to a developed economy status by 2047 – a transformation estimated to require banking sector funding reaching 130% of GDP compared to the current 56%, supporting projected GDP growth to around $30 trillion.

Among global banking institutions, only SBI and HDFC Bank feature within the top 100 by asset size, while Chinese and American counterparts dominate the highest rankings.

Amid international trade policy adjustments, including recent U.S. tariff revisions, Setty indicated that while export sectors experienced some impact, SBI hasn’t observed significant sector-wide distress. “We maintain credit support for exporters and provide necessary accommodations where required,” he remarked.

The government-sponsored bank reports renewed corporate capital expenditure activity but acknowledges increasing competition within corporate lending. Setty noted, “While numerous institutions target corporate portfolio growth, the finite number of major enterprises maintains intense competitive pressure.” SBI recently raised its annual credit growth projection from 11-13% to 12-14%.

With 39 years of service at SBI, Setty’s professional journey began in finance management during his youth, assisting his father’s village grocery business. Post-pandemic, his leadership contributed significantly to resolving nearly $20 billion in non-performing assets.

Despite its commanding position, SBI remains focused on market expansion. “Our strategy isn’t defensive regarding market position but proactively growth-oriented,” Setty emphasized, highlighting that international capital participation doesn’t diminish domestic opportunities. SBI’s ₹69 lakh crore asset base substantially surpasses second-ranked HDFC Bank’s ₹40 lakh crore.

India’s banking sector attracts notable foreign investments in fintech and insurance, with SBI shares rising 19% annually compared to the Nifty Bank index’s 16% gain. Proposed regulatory changes enabling direct corporate acquisition financing by lenders could accelerate deal activity in India’s $40+ billion mergers and acquisitions market. Setty emphasized that new guidelines would prevent excessive lender exposure to such transactions.

“The participation of domestic financiers with lower capital costs may reduce deal pricing, though merger financing requires differentiated risk assessment compared to standard loans,” Setty explained.

To capture wealth management opportunities fueled by equity markets and real estate transactions, SBI has expanded its advisory teams with 1,000 relationship managers recruited externally and 2,000 internal role adaptations over twelve months. The bank has established over 110 specialized wealth centers primarily in metropolitan areas, targeting 50-100 additional hubs within two years.

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Published on November 14, 2025