Public sector bank stocks are currently experiencing significant activity. Union Bank of India and Bank of India are particularly in the news. The reason is the news that the central government is preparing to merge these two banks. The market is excited about this potential major decision, and investor interest is steadily increasing in these banks.

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If these two banks merge, it will become the country’s second-largest public sector bank after the State Bank of India. Currently, the government has taken several steps to reform and strengthen PSU banks, and this potential merger is considered another major step in that direction.

A few years ago, the government carried out the first round of PSU bank mergers, which included Andhra Bank and Corporation Bank into Union Bank. Now, there is speculation about the Bank of India merging with UBI. The news of this potential merger has received a positive response from the stock market. In the past five trading sessions, Union Bank shares have gained nearly three and a half percent, while Bank of India shares have gained over one percent.

Regarding returns, Union Bank of India has delivered over 23 percent so far this year, with a 10 percent increase in the past month. Meanwhile, Bank of India has delivered a YTD return of approximately 39 percent and a 13 percent return in the past month, making it quite attractive for investors.

However, there has been no official confirmation from the government regarding this merger. Looking at financial data, Union Bank’s September quarter results were mixed. The bank’s net profit declined year-on-year, and net interest income also declined slightly. On the other hand, Bank of India performed better in the quarter, with profits increasing by eight percent, while NII declined slightly.

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Market experts say that stocks often see a slight decline after sharp news-driven rallies. Nevertheless, both banks are strong, and long-term investors see opportunity in these stocks. Experts advise avoiding hasty investments and FOMO and buying at the right level.