When the Banker magazine published its annual list of the world’s largest banks in 1990, Japan was unstoppable. Sumitomo Bank was the top player and Japanese bankers dominated most of the top ten. At the time, many believed the centre of global finance had moved to Tokyo. Japan’s massive asset bubble burst within two years and the country then suffered decades of economic stagnation which we now call the “Lost Decades.”
This historical episode is important for the Banker’s 2026 rankings where Chinese banks are now at the top of world finance.
For the seventh consecutive year, China’s “Big Four” (ICBC, China Construction Bank, Agricultural Bank of China and Bank of China) remain the top four banks with Tier-1 capital. The Postal Savings Bank of China also entered the top 10 for the first time in the world, and now seven of the world’s ten largest banks are Chinese. American banks JPMorgan Chase, Bank of America and Citigroup are still the only non-Chinese banks in the top tier.
The rankings raise two questions. Does the size of China’s banking system translate into long-term economic and geopolitical power? And should India be concerned that none of its banks are anywhere near the global top ten?
Why China's Banks Are So Large
Tier-1 capital measures a bank’s core financial strength, including shareholder equity and reserves available to absorb losses. Higher Tier-1 capital reflects a larger lending capacity.
China’s huge banks are a product of its economic model. For years the country has relied on bank lending to finance infrastructure, manufacturing and property development. China’s private sector’s bank credit (in 2024) was nearly 194 percent of GDP, compared to only 42 percent in India, World Bank data show. With an avalanche of household savings deposited into state-owned banks, Beijing can finance large-scale development projects and keep credit flowing through the economy.
The rise of the Postal Savings Bank of China perfectly illustrates this model. What began as millions of savings accounts at local post offices has grown into one of the world’s largest financial institutions.
But history also tells us that big balance sheets alone are not enough to succeed. Japan’s banking giants once enjoyed similar dominance before the country’s financial system suffered long-term decline.
Beyond Size: Building Financial Influence
China’s ambitions go well beyond creating big domestic banks. It’s also investing heavily in building an international financial infrastructure that reduces dependence on the U.S. led global financial system.
The US dollar’s supremacy is not only a function of American banks but also payment networks like SWIFT, through which most international financial transactions are made. The freezing of hundreds of billions of dollars of Russian reserves following the Ukraine conflict showed how powerful this financial infrastructure can be.
As a result, China has accelerated the development of the Cross-border Interbank Payment System (CIPS) - a system that is another platform that can be used for international payments in yuan - to connect the international payment system. Today, more than 1,800 financial institutions worldwide are linked and, on average, process hundreds of billions of yuan transactions with Chinese banks every day.
Even though the yuan has a very small share of global payments now, Beijing is gradually building up what many analysts call a financial insurance policy against future sanctions and a rejection from Western payment systems.
India's Banking Challenge
India's banking sector is a very different picture.
State Bank of India remains the country’s biggest lender, but it is not among the world’s top banks by global standards. There have been a lot of public sector bank mergers in the past decade, yet India hasn’t developed globally significant banking institutions to rival Chinese banks in terms of global financing.
That is not enough to climb the world rankings.
Over the years, India will need huge investment to fund highways, railways, ports, renewable energy projects and manufacturing expansion. Strong domestic banks should be in place to back up these ambitions and support India’s growing regional influence through cross-border lending and payment systems.
And at the same time, UPI’s expansion abroad and efforts to promote rupee-based trade settlements are among the first steps towards developing India’s own financial infrastructure.
Bigger Isn't Always Better
The lesson from the past is clear. Japan once ruled global banking until its economic model slipped. China remains so powerful today, but it’s not clear whether that banking supremacy will translate into global leadership in the long run.
For India, the point should not be to chase league-table rankings for prestige only. Building financially strong banks that will support domestic growth and overseas expansion and payment networks that will make India a country of its own should instead be the focus.
In the end, global influence is also determined by the size of a country’s banks and the resilience of the financial systems and payment networks that support them. As international finance is increasingly entwined with geopolitics, those networks could be as powerful as the money banks have on their balance sheets.
