Mega Bank Merger: These 4 Public Sector Banks May Cease To Exist | Banking and Finance News

Discussions and consultations are expected to take place in FY27. (Representative/PTI)

In a move that could reshape India’s banking landscape, the Union Government is reportedly planning to merge smaller state-owned banks with larger ones. According to a Moneycontrol report, the consolidation aims to create stronger, more efficient institutions capable of driving the next phase of credit growth and financial reforms.

Banks To Be Merged

• Indian Overseas Bank (IOB)
• Central Bank of India (CBI)
• Bank of India (BOI)
• Bank of Maharashtra (BoM)

Banks They Will Merge Into

• Punjab National Bank (PNB)
• Bank of Baroda (BoB)
• State Bank of India (SBI)

An internal government document detailing the merger plan, named ‘Record of Discussion,’ will first be reviewed by senior officials at the cabinet level and then by the Prime Minister’s Office (PMO). Discussions and consultations are expected to take place in FY27, with a roadmap to be finalised within the same year. The Ministry of Finance has not yet commented on this proposal.

Public Sector Banks Consolidation Drive

This decision is part of the government’s ongoing efforts to strengthen public sector banks. Between 2017 and 2020, the central government merged 10 state-owned banks into four large banks, reducing the total number of PSBs from 27 in 2017 to 12.

For example, Oriental Bank of Commerce and United Bank of India merged with Punjab National Bank. Similarly, Syndicate Bank merged with Canara Bank. Five associate banks and Bharatiya Mahila Bank merged with SBI. The associate banks included State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Mysore, State Bank of Patiala, and State Bank of Hyderabad.

Why Is The Government Still Merging Banks?

According to reports, NITI Aayog suggested maintaining only a few large public sector banks like SBI, PNB, BoB, and Canara Bank, and either merging or privatising the rest. As part of this, it was decided to merge smaller PSBs like IOB and CBI.

Experts believe this plan is suitable for current conditions because fintech and private banks are rapidly expanding. To compete with them, public banks need to be very strong. The government believes that large, well-capitalised banks will be more efficient and competitive internationally.