Building banks for a global India

As India aspires to become a developed economy by 2047, it cannot depend only on small banks, limited bond markets and foreign financial institutions. It will need financial institutions that are large enough, resilient and ambitious enough to operate on a truly global scale.

This is not just a question of banking policy. It is about building the financial architecture of the India we want to see in 2047.

When PM Modi’s Government took office in 2014, public sector banks were still dealing with the consequences of the credit boom of the preceding years and a sharp rise in bad loans.

The response was a sustained programme of reforms aimed at cleaning up bank balance sheets, improving governance, strengthening Capital and creating more resilient institutions.

That effort has produced visible results. Indian banking today is in a fundamentally stronger position than it was a decade ago. The question before us now is much more exciting: can Indian banks become global champions?

Prime Minister Narendra Modi has articulated the ambition of having an Indian bank among the world’s top five. The broader goal is to have two or three Indian public sector banks among the world’s top 20 by 2047.

These are ambitious targets. But they are also entirely consistent with the scale of India’s economic aspirations. As India grows, Indian companies will invest and trade more across the world.

They will finance overseas projects, acquire businesses, establish global supply chains and enter new markets. They will need banks that can finance overseas projects, support international trade, handle cross-border payments and understand the complexities of operating across jurisdictions. A more international India will inevitably need more international Indian banks.

There are four things we need to get right.

The first is scale. Small and fragmented banks cannot easily compete with the world’s largest banks. India has already made significant progress here. There were 27 public sector banks in 2017. After a series of mergers, there are now 12.

The idea was simple: create fewer but stronger banks that could invest more in technology, risk management and compliance.

The results are visible. Indian public sector banks are now in much better financial health than they were a decade ago. But there is still a long way to go. In S&P Global’s 2026 ranking of the world’s largest banks by assets, State Bank of India was ranked 45th. That shows both the progress made and the size of the challenge ahead.

The second is capital. Indian banks need access to capital, technology and expertise from both domestic and international investors. The Government had announced plans in the 2021-22 Budget to privatise two public sector banks. That process has moved slowly, with the IDBI Bank disinvestment still taking time. At the same time, in 2025, Japan’s SMBC acquired a 20 per cent stake in Yes Bank. It was the largest cross-border banking transaction in India. Such investments can bring not just capital, but also international experience and stronger links with global financial markets.

The third requirement is a deeper corporate bond market. Banks cannot and should not provide all the financing that a growing economy needs.

Large companies should also be able to raise money directly from investors through bonds. This spreads risk across the financial system and gives companies another source of funding. India’s corporate bond market has grown considerably.

Corporate bond issuance reached a record Rs 9.9 lakh crore in FY25, compared with Rs 8.6 lakh crore in FY24. Outstanding corporate bonds stood at around Rs 53.6 lakh crore by March 2025. SEBI has also required large corporates to raise at least 25 per cent of their qualified borrowings through debt securities. There is still considerable room for growth.

India’s corporate bond market was equivalent to about 18 per cent of GDP in 2024, compared with roughly 80 in Korea and 36 in China. The challenge now is not only to increase the size of the market, but also to make it easier for more companies and investors to use it.

The fourth, and perhaps most important, requirement is a much bigger international presence for Indian banks. This is where GIFT IFSC can play an important role. GIFT IFSC can help India become a larger centre for international finance.

It brings Indian and foreign banks together on a common platform and allows a range of cross-border financial activities to be carried out from India.

By December 2025, 37 international banking units were operating in GIFT IFSC, comprising Indian and foreign banks, with assets of more than $106 billion.

Its importance lies in the financial activity it can attract to India and the capabilities it can help develop. Indian banks can use GIFT IFSC as a base for foreign-currency transactions, international lending and cross-border business. But a financial centre in India is only one part of a larger ambition. Indian banks will become global players when they build substantial overseas balance sheets, stronger foreign branches and subsidiaries, and the ability to finance Indian companies across international markets.

That will require deeper trade-finance networks and a stronger presence in countries where India’s trade and investment links are growing. Indian banks must be able to support companies not only when they are operating at home, but also when they invest, acquire businesses and expand abroad.

The transformation of Indian banking over the past decade has created a considerably stronger foundation for the next phase.

The next challenge is to convert these gains into global scale.

The task for the coming decades is to build banks that are not only large enough to serve a global-scale economy, but capable of competing confidently in the global financial system.

The author is a national spokesperson of BJP and acclaimed author; Steve Rajpurohit is a public policy analyst; Views presented are personal.