New Delhi, Dec. 1 -- The government is reportedly preparing for another round of public sector bank (PSB) consolidation, five years after the last major merger exercise brought the number of state-owned lenders down to 12 from 27.

The renewed push aims to create fewer, larger institutions with the balance-sheet strength of global-scale banks, capable of supporting India's expanding investment and credit requirements.

However, a deeper concentration of banking activity within a handful of mega lenders raises concerns over diluted regional priorities and heightened systemic risks should stress build up in one or two dominant institutions. As discussions gather pace, the challenge will be to strike a balance between scale and stability, wh...