The pressure is on the big profit-making banks, with multiple inquiries into whether Kiwis are being ripped off.
A draft Commerce Commission report has found there is not enough competition in the banking sector.
But now the Government wants MPs to scrutinise bank bosses and come up with their own ideas for making sure Kiwis are getting a fair go.
Speaking to 1News, Finance Minister Nicola Willis said: "We want a public, open accountable inquiry that's transparent and New Zealand's can watch... I think sunlight is sometimes the best disinfectant."
Willis has asked for a Parliamentary inquiry into every aspect of banking such as personal, business and rural — to ascertain whether Kiwis are being ripped off.
"The evidence says our banks make bigger profits here than in other countries ... it's worth us examining why that is, Kiwis just want a fair deal."
In response, the Labour Party welcomed the move, but questioned why the Government didn't just boost the work of the Commerce Commission, which was already halfway through an inquiry into personal banking.
Labour finance spokesperson Barbara Edmonds said the Government was "cutting the Commerce Commission off at the knees".
"They have reduced their budget, so even if we get to the point where there's been action, the ComCom will not be able to do deeper studies into fuel and groceries... they also won't be able to do enforcement."
1News reporter Katie Bradford said there was a key difference between the Commerce Commission and a Select Committee inquiry.
"A Parliamentary committee can make recommendations, it's then up to the Government to make any law changes. The Commerce Commission has the power to delver deeper, then monitor competitive behaviour and call it out if it wants to."
Banks are 'happy to be open and transparent'
Bankers Association chief executive officer said banks had "nothing to hide".
"We're a very open and transparent industry, it's partly because we're so heavily regulated, we're happy to be open and transparent."
The Reserve Bank and Commerce Commission were also likely to be called before MPs. Both said they welcomed the inquiry.
The final Commerce Commission report was due in August, and the Finance Minister said she wanted MPs to consider this as part of their inquiry.
Massey University professor of banking David Tripe said more scrutiny could be a good thing but he was unsure it would alter the way the sector behaved.
"It'll certainly bring out some sunlight, whether it's actually going to end up changing a lot is another matter."
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