Banking Notes / Banking Awareness / Chapter 15
Chapter 15 of 17

Banking Reforms, Mergers, Committees & Recent Developments

The bank merger timeline, key banking committees and their recommendations, and the 'One State, One RRB' consolidation reshaping rural banking.

📖 ~10 min read 🏛️ Banking Awareness

Introduction

Indian banking has undergone repeated rounds of structural reform — from public sector bank mergers to committee-driven policy changes — aimed at improving efficiency, capital strength, and governance.

Key Committees in Banking History

CommitteeKey Recommendation
Narasimham Committee I (1991)Recommended reducing SLR/CRR, deregulating interest rates, and strengthening bank capital adequacy — laid the foundation for 1990s banking reforms
Narasimham Committee II (1998)Focused on strengthening the banking system further, addressing NPAs, and improving disclosure norms
Vyas CommitteeRecommended consolidation of Regional Rural Banks, forming the basis for RRB merger phases since 2005-06
Nayak CommitteeReviewed governance issues in public sector banks
P.J. Nayak Committee (2014)Recommended reducing government stake in PSBs and improving board governance

Public Sector Bank Mega-Mergers (2017-2020)

MergerEffective
SBI + 5 Associate Banks + Bharatiya Mahila Bank2017
Bank of Baroda + Vijaya Bank + Dena Bank2019
PNB + Oriental Bank of Commerce + United Bank of India2020
Canara Bank + Syndicate Bank2020
Union Bank of India + Andhra Bank + Corporation Bank2020
Indian Bank + Allahabad Bank2020

These mergers reduced the total number of Public Sector Banks in India from 27 (in 2017) to 12.

Recent Development: One State, One RRB

📌 Current Reform: Effective May 1, 2025, the government amalgamated 26 Regional Rural Banks across 11 states and 1 Union Territory into consolidated state-level entities under the "One State, One RRB" policy — the fourth phase of RRB consolidation since 2006. This reduced the total number of RRBs nationally from 43 to 28, covering over 22,000 branches across roughly 700 districts. Each restructured RRB received an authorised capital of ₹2,000 crore. The government has also signalled plans to list some RRBs publicly by the end of FY 2026-27.
Q. How many Public Sector Banks remain in India following the 2017-2020 rounds of mega-mergers, down from 27 in 2017?
Following the merger rounds, the number of Public Sector Banks was reduced to 12.
⚠️ Key Insight: The Narasimham Committee had two distinct reports (1991 and 1998) with different areas of emphasis — exams sometimes test which specific recommendation belongs to which of the two reports, so don't treat them as a single undifferentiated committee.
✅ Practice Focus: Exact PSB merger pairings and years · Narasimham I vs II distinctions · One State One RRB consolidation figures (43→28 RRBs, effective date) · Total current PSB count.

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