Public sector banks (PSBs) in India may soon see another phase of mergers. This time too, smaller banks could be merged with larger ones.
According to government sources quoted by Moneycontrol, the aim is to simplify the public banking structure and create fewer but stronger banks.
These stronger entities will be better equipped to support future credit growth and financial sector reforms.
Sources suggest that Indian Overseas Bank (IOB), Central Bank of India (CBI), Bank of India (BOI),
and Bank of Maharashtra (BOM) could be merged with bigger banks such as Punjab National Bank (PNB), Bank of Baroda (BoB), and State Bank of India (SBI).
The government’s goal is to strengthen public sector banks by improving their balance sheets and overall performance.
Roadmap Expected by FY 2027
A detailed plan will first be drafted by senior cabinet officials and then reviewed by the Prime Minister’s Office.
This document—known as the record of discussions—will include the key points and serve as the foundation for future decisions.
The discussions and consultations are expected to take place during FY 2027, which is the tentative timeframe for finalizing the roadmap.
During this process, feedback will also be taken from the banks involved in the possible mergers.
According to sources, the government wants to build internal agreement before making any official announcements.
Based on NITI Aayog’s Recommendations
The idea of creating a few large public sector banks comes from recommendations made earlier by NITI Aayog.
The think tank had suggested keeping only a few major banks—SBI, PNB, Bank of Baroda, and Canara Bank—under government control.
The rest could be merged, privatized, or have reduced government ownership.
A government source told Moneycontrol that the new plan follows the same principle but has been updated for current conditions.
With fintech companies growing rapidly and private banks expanding, the focus is now on strengthening public sector banks strategically rather than breaking them into smaller ones.
Previous Bank Mergers (2017–2020)
Between 2017 and 2020, the government merged 10 public sector banks into four large ones, reducing their total number from 27 in 2017 to 12. Here’s how the previous mergers took place:
State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala, State Bank of Travancore, and Bharatiya Mahila Bank merged with State Bank of India.
Oriental Bank of Commerce and United Bank of India merged with Punjab National Bank.
Syndicate Bank merged with Canara Bank.
Dena Bank and Vijaya Bank merged with Bank of Baroda.
Allahabad Bank merged with Indian Bank.
Andhra Bank and Corporation Bank merged with Union Bank of India.
