New Delhi, June 18 -- The finance ministry may ask a new banking reforms committee to consider proposals to merge 12 state-run lenders into five and raise their foreign investment cap to 49%, three people aware of the discussions said. The committee may be headed by former department of financial services (DFS) secretary M. Nagaraju, and a formal announcement on its composition and the terms of reference is likely early next month, the people cited above said on the condition of anonymity. "Discussions on the committee's terms have already been held with the Prime Minister's Office (PMO)," one of the three people said, adding that the proposal to consolidate PSBs is among them. The Union budget for FY27 had proposed a committee to chart 'Banking for Viksit Bharat,' aimed at improving efficiency, governance and competitiveness among PSBs. Finance minister Nirmala Sitharaman had said reforms will help align public sector banks "with India's next phase of growth, while safeguarding financial stability, inclusion and consumer protection." The committee may comprise up to five members, including current DFS secretary Sanjay Lohiya, the people cited above said. A former chairman of the State Bank of India and a former deputy governor of the Reserve Bank of India (RBI) are also being considered for the committee, the people said, though Mint could not confirm their identities. "The proposed consolidation is expected to follow the broad template of the government's previous round of PSB mergers undertaken in 2019-20," the second person added. On 1 April 2020, the government merged 10 PSBs into four larger entities. Oriental Bank of Commerce and United Bank of India were amalgamated with Punjab National Bank; Allahabad Bank merged with Indian Bank; Syndicate Bank with Canara Bank; and Andhra Bank and Corporation Bank with Union Bank of India. Earlier, in April 2019, Dena Bank and Vijaya Bank were merged with Bank of Baroda. The consolidation drive reduced the number of public sector banks from 27 in 2017 to 12 by 2020, aiming to improve operational efficiency, risk management, capital utilization and lending capacity. The new committee may also recommend raising the foreign direct investment (FDI) cap of 20% in PSBs to as much as 49% to attract global capital and strengthen banks' balance sheets. "Among the key proposals under consideration is a further liberalization of FDI norms in PSBs. The committee may recommend raising the current FDI cap of 20% to as much as 49% to attract greater global capital and strengthen banks' balance sheets. In addition to capital and ownership reforms, the committee is also expected to focus on human resource policies within PSBs," the third person said. Earlier, Mint reported that the finance ministry is drawing up a fresh blueprint to merge select public sector banks. The report cited discussions around a potential merger of Union Bank of India and Bank of India, creating a state-run lender ranked second only State Bank of India. The ministry is also weighing the option to merge Indian Overseas Bank and Indian Bank, the report said.....