Government Prepares Next Round of PSU Bank Mergers to Create Global-Scale Lenders
In 2017, there were 27 PSU banks, a number that has now come down to 12 following a series of mergers
The Government of India has begun preparations for the next round of public sector bank (PSU Bank) consolidation, aiming to create large, globally competitive lenders aligned with the vision of a developed India by 2047. Discussions are understood to be underway between the government, the Reserve Bank of India (RBI), and select PSU banks.
Finance Minister Nirmala Sitharaman recently underlined the need for “several large, world-class banks” to support India’s long-term economic ambitions. Policymakers believe that larger banks with greater scale will be better positioned to raise capital, compete globally, and finance large infrastructure and development projects.
At present, India has 12 public sector banks, with State Bank of India (SBI) ranking 43rd among the world’s top 50 banks. PSU banks together account for nearly 60% of the country’s total banking business, reinforcing their strategic importance in India’s financial system.
Banks Likely to Be Considered for Merger
According to media reports, the government is considering merging small and mid-sized PSU banks with larger lenders.
Banks that may come under the consolidation framework include:
- Indian Overseas Bank (IOB)
- UCO Bank
- Bank of India
- Bank of Maharashtra
- Central Bank of India
- Punjab & Sind Bank
These banks could potentially be merged with larger PSU banks such as SBI, Punjab National Bank (PNB), Bank of Baroda, Canara Bank, or Union Bank of India.
Previous PSU Bank Mergers
India’s banking landscape has already undergone significant consolidation. In 2017, there were 27 PSU banks, a number that has now come down to 12 following a series of mergers.
Key mergers include:
- United Bank of India and Oriental Bank of Commerce with PNB (April 1, 2020)
- Syndicate Bank with Canara Bank
- Allahabad Bank with Indian Bank
- Andhra Bank and Corporation Bank with Union Bank of India
- Dena Bank and Vijaya Bank with Bank of Baroda (2019)
Earlier, SBI absorbed five associate banks and Bharatiya Mahila Bank in 2017, significantly expanding its balance sheet and branch network. The mergers took SBI’s total assets to around ₹44 lakh crore and branches to over 22,500.
IDBI Bank Disinvestment on Track
Alongside consolidation, the government is also progressing with the strategic disinvestment of IDBI Bank. Department of Investment and Public Asset Management (DIPAM) Secretary Arunish Chawla has indicated that the transaction is expected to be completed by March 2026.
In January 2019, the government sold a 51% stake in IDBI Bank to LIC, with the remaining stake now slated for sale to private investors.
