PSU bank mergers: Significant changes are once again being heard within public sector banks. Following the mega mergers of 2019-20, the central government is now seriously considering the next phase of integration of public sector banks (PSU Banks). The government believes that India needs large and strong banks in the coming years that can meet the country’s rapid economic growth, major infrastructure projects, and global competition.
According to a report, with the goal of a developed India by 2047 in mind, the government wants Indian banks to be seen as a match not only for the country but also for the world’s largest banks. Initial discussions have already begun with the Reserve Bank and public sector banks to this end. Clearly, the year 2026 may see another major PSU bank merger announcement.
Why is PSU bank merger in the news again?
Currently, India has 12 public sector banks. Of these, only State Bank of India is among the top 50 banks in the world. In the private sector, HDFC Bank also ranks outside the top 100. The government believes that having larger banks will strengthen capital, increase risk-taking capacity, and strengthen India’s international presence.
Big integration has already happened
The government has already merged PSU banks. In the 2019-20 mega merger, 27 public sector banks were reduced to 12. United Bank and Oriental Bank of Commerce merged with Punjab National Bank. Syndicate Bank merged with Canara Bank. Allahabad Bank merged with Indian Bank. Andhra Bank and Corporation Bank merged with Union Bank. Earlier, Dena and Vijaya Bank were merged with Bank of Baroda.
SBI’s long merger journey
SBI first expanded its size by merging its associate banks. After the merger of associate banks in 2017, SBI’s assets reached approximately Rs 44 lakh crore. This strengthened the bank not only in the country but also globally. The government is also working on a stake sale in addition to the merger. The process of selling the government’s stake in IDBI Bank is underway, and the target is to complete the deal by March 2026. Previously, the government sold its controlling stake in IDBI to LIC.The financial position of public sector banks is now much better than before. In the first half of FY26, 12 PSU banks earned a profit of approximately Rs 93,675 crore. This figure could exceed Rs 2 lakh crore for the full year. Strong profits are giving the government the confidence to take major decisions.