PSU Bank Merger: The number of public sector banks in the country is about to shrink even more. The government is combining smaller public sector banks with larger ones. The goal is to replace the smaller banks with a single larger bank, enhancing their operational efficiency. The government aims to reduce the number of banks while creating a stronger entity, which will help improve the financial sector, broaden loan coverage, and enhance balance sheets and operations. In this context, plans are currently in motion to merge six additional smaller public sector banks.

Which banks are on the list?

The six smaller public sector banks that might be merged include Indian Overseas Bank, Central Bank of India, UCO Bank, Bank of India, Bank of Maharashtra, and Punjab & Sind Bank. These could potentially merge with SBI, Bank of Baroda, PNB, Canara Bank, or Union Bank. All six are being considered for the next round of consolidation.

What did NITI Aayog suggest?

A previous report from NITI Aayog recommended that the government either privatize or restructure smaller banks like Central Bank of India and Indian Overseas Bank. The national think tank believes that the Indian government should keep a few large public sector banks, such as Punjab National Bank (PNB), Bank of Baroda (BoB), Canara Bank, or State Bank of India. Other smaller public sector banks could either go for privatization or merger, or have the government’s stake reduced.

Reports indicate that Indian Overseas Bank might merge with SBI or PNB. Central Bank of India could be acquired by PNB or BoB. Either SBI or BoB could take over Bank of India. Bank of Maharashtra might merge with PNB or BoB.

These banks were merged earlier

Earlier, between 2017 and 2020, 10 small public sector banks were merged into four banks, reducing the number of public sector banks in the country from 27 in 2017 to 12. 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 were merged with State Bank of India. Oriental Bank of Commerce and United Bank of India merged with Punjab National Bank. Dena Bank and Vijaya Bank merged with Bank of Baroda. Syndicate Bank merged with Canara Bank. Andhra Bank and Corporation Bank merged with Union Bank of India, and Allahabad Bank merged with Indian Bank.