By Kavita Mistry 
India is preparing for a major overhaul of its banking sector to align with its ambitious goal of becoming a developed economy by 2047. According to a Bloomberg report, the Finance Ministry and RBI are in talks to issue new banking licences after nearly a decade, aiming to expand the number and size of Indian banks.
New Licences After a Decade: What’s on the Table
India last issued fresh banking licences in 2014. Now, officials are said to be considering:
- Allowing large business houses to apply for licences with ownership restrictions.
- Encouraging NBFCs to convert into full-service banks.
- Merging smaller banks to form larger, more capable institutions.
- Relaxing FDI rules in state-owned banks to attract foreign capital.
Why India Needs Bigger, Bolder Banks
Currently, only State Bank of India and HDFC Bank rank among the top 100 global banks by assets. To fund infrastructure, manufacturing, and digital growth, India needs banks that can:
- Lend for longer durations.
- Serve rising credit demands.
- Support ambitious GDP expansion from the current $3.7 trillion to $7–10 trillion over the next 20 years.
The push is also driven by Prime Minister Modi’s 2047 goal — transforming India into a fully developed economy, which would require increasing bank credit from 56% of GDP to 130%, according to experts.
Challenges and Safeguards
The idea of allowing industrial houses into banking is controversial. It was banned in 2016 due to concerns over connected lending. If reintroduced, it will likely include strict safeguards on shareholding, governance, and risk management.
RBI Governor Sanjay Malhotra recently confirmed a review of the licensing framework, indicating momentum toward reform.
Global Interest Grows
Foreign investors are watching closely. In May 2025, Japan’s Sumitomo Mitsui Financial Group acquired a 20% stake in Yes Bank, marking the largest-ever foreign investment in an Indian bank.
If reforms move forward, India’s banking sector could become more competitive, better capitalized, and capable of funding its future — at scale and with resilience.