Overview of the Proposed Merger
Six smaller government-owned banks may soon be merged to form a single large public sector bank. The central government is working on a new restructuring plan that could significantly change India’s banking landscape. This comes nearly five years after the last major round of bank mergers.
The proposed merger aims to reduce the number of PSU banks, enhance efficiency, and strengthen the overall banking system.
Possible Banks to Be Merged
According to early reports, around six smaller banks — including Indian Overseas Bank (IOB), Central Bank of India, and Bank of India — could be merged with larger banks such as:
- State Bank of India (SBI)
- Punjab National Bank (PNB)
- Bank of Baroda (BoB)
These discussions are currently in the preliminary phase, and an official decision is expected in the next financial year after extensive reviews.
Government’s Objective Behind the Merger
The central government aims to replace smaller PSU banks with stronger, larger institutions to support long-term economic growth. A larger bank will have greater funds and lending capacity, allowing it to:
- Issue more loans
- Fund larger infrastructure or corporate projects
- Reduce operational and administrative costs
- Improve banking efficiency nationwide
However, no official notification has been released yet. NITI Aayog had earlier recommended merging smaller banks with larger ones to strengthen India’s banking structure.
Previous Bank Mergers in India
- April 2017: SBI merged six associate banks including State Bank of Bikaner & Jaipur, Hyderabad, Patiala, Mysore, Travancore, and Bharatiya Mahila Bank, making SBI the largest PSU bank.
- April 2020: Oriental Bank of Commerce and United Bank of India were merged with PNB, making it the second-largest public sector bank.
- April 2019: Vijaya Bank and Dena Bank were merged with Bank of Baroda, making it the third-largest PSU bank.
- Between 2017–2020: Several smaller PSU banks were merged into major banks, reducing the total number of public sector banks from 27 to 12.
What Happens Next?
More clarity is expected once the government completes detailed financial evaluations and holds discussions with stakeholders. If approved, this next round of mergers will further consolidate the Indian banking sector and create stronger, more competitive public sector banks.
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