Indian Banks – Looking Forward to Scalability

Two key figures of India's financial architecture—the Finance Minister, Smt. Nirmala Sitharaman, and the RBI Governor, Mr. Malhotra—have recently articulated their vision for building larger, stronger, and more scalable banks.

- Saptarshi Roy Bardhan

While the Finance Minister spoke of creating many world-class banks, the RBI Governor emphasised the need for large-scale, carefully calibrated reforms to strengthen an already robust banking ecosystem. Both were speaking at the recently concluded SBI Banking and Economic Conclave.

India's banking sector has scaled new heights in the 21st century. In the aftermath of the 2007-08 Global Financial Crisis—which exposed overleveraged corporates, stressed bank balance sheets and external vulnerabilities—India was even placed among the “Fragile Five” emerging economies (Turkey, Indonesia, Brazil, South Africa, and India).

That phase marked the beginning of deep structural corrections.

From 2014 onwards, a comprehensive cleanup began, driven by regulatory measures focused on recognition, resolution, and recapitalisation. A crucial milestone was the 2015 Asset Quality Review (AQR), which forced banks to disclose the true extent of NPAs. The Prompt Corrective Action (PCA) framework helped restore the health of weak banks, while enhanced supervisory tools such as periodic stress tests ensured sustained discipline.