Bank Merger Update – Govt May Reduce Banks from 12 to 4 by 2027? Check inside Full Details

Mega PSU bank merger plan: The central government is in the midst of major preparations for bank mergers. A plan for the merger of public sector banks is being developed. If everything goes according to plan, there will be only four public-sector banks in the country by 2027, down from 12. The Indian government’s goal is to create larger, world-class banks, but fewer of them. Once again, PSU bank mergers are in the news.

At the same time, the future of smaller lenders like Indian Overseas Bank, Bank of Maharashtra, Bank of India, Central Bank of India, UCO Bank, and Punjab & Sind Bank remains uncertain. According to media reports, the government may reduce the number of PSBs from 12 to 4 by the 2026-27 financial year. According to the government’s plan, upon completion of the merger, only four banks will remain in the country, including the State Bank of India, Punjab National Bank, Bank of Baroda, and Canara-Union Bank.

PSU Banks Merger 2.0:

As of December, government officials denied any plans for bank mergers in Parliament’s winter session. When asked whether public sector banks would be merged to form larger banks, State Minister for Finance Pankaj Chaudhary stated, “There is currently no proposal under consideration by the government for the merger or consolidation of public sector banks (PSBs).” This was in response to a question asked in the Lok Sabha. However, at the SBI Conclave, Finance Minister Nirmala Sitharaman said, “India needs many large banks, world-class banks.” She stated last month that bank mergers have already begun.

This is not the first time that public sector banks have been merged. Before this, from 2017 to 2020, the government initiated several bank mergers to create larger banks. The number of public sector banks in the country has declined from 27 to 12, and this could further decline to just four.

Which banks may be merged?

The list of bank mergers includes six smaller public-sector banks: Indian Overseas Bank, Central Bank of India, UCO Bank, Bank of India, Bank of Maharashtra, and Punjab & Sind Bank.

Bank of Baroda (April 2019) Bank of Baroda + Vijaya Bank + Dena Bank After the merger of Vijaya Bank and Dena Bank, Bank of Baroda became the second-largest PSU bank.

April 2020: Union Bank of India, Andhra Bank, and Corporation Bank. Following the merger with Andhra Bank and Corporation Bank, Union Bank became India’s fifth-largest PSU lender.