Bank Merger Update: The Indian banking sector is once again abuzz with activity. The central government is preparing for the merger of two major banks. Both banks are headquartered in Mumbai, and if the merger proceeds, the resulting entity will become the country’s second-largest public-sector bank after the State Bank of India. Finance Minister Nirmala Sitharaman has made significant statements regarding mergers among Indian banks. She emphasised that India needs large banks capable of competing with global financial institutions. Currently, the State Bank of India is the largest bank in the country. The government is preparing to merge two public-sector banks to create a new bank, which will become the second-largest in India after SBI.
Which banks will be merged?
The government is planning to merge Union Bank of India and Bank of India. Together, these two banks have 255 million customers, making the new entity slightly smaller than SBI. Both banks are headquartered in Mumbai, and preparations for the merger have been underway for several years. The objective of this merger is to reduce bank losses, decrease non-performing assets (NPAs), improve operational efficiency, and strengthen the financial stability of the merged entity.
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SBI is India’s largest bank
Several media reports indicated that the Finance Ministry was considering merging two Chennai-based public sector banks—Indian Overseas Bank and Indian Bank. Plans were also being considered for Punjab & Sind Bank and Bank of Maharashtra. These banks have smaller asset bases than other large public-sector banks, so the government may consider them for privatisation in the future.
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If the government’s plan to merge Union Bank of India and Bank of India is implemented, the merged entity will become the country’s second-largest public sector bank, with assets of approximately ₹25.67 lakh crore. Currently, the largest public sector bank in the country is the State Bank of India.
Between 2017 and 2020, the government merged 10 public sector banks into four larger banks. Subsequently, the number of government-owned banks, which stood at 27 in 2017, was reduced to 12.
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However, this is currently only at the discussion stage, and no official announcement has been made.