PSU Banks Merger: From SBI To BoB, List Of Mega Bank Mergers; Who's Next? IOB, BOM, UCO, BOI On High Alert

The merger of PSU banks is highly anticipated from Finance Minister Nirmala Sitharaman during Budget 2026. Just recently, the FM suggested the government and RBI evaluate multiple options to give birth to world-class state-run banks that can support huge capital needs of the fast-growing economy. Among the multiple routes, merging smaller state-run banks is also a possibility.

PSU Banks Expectations In Budget 2026?

Currently, it is widely expected that Indian Overseas Bank, UCO Bank, Bank of India, Central Bank, Bank of Maharashtra could join larger banks like SBI, Bank of Baroda, PNB, Canara Bank or Union Bank.

Earlier, a Niti Aayog report suggested the government either privatize or restructure smaller banks like Central Bank of India and Indian Overseas Banks. The country's think tank believes that the Indian government should keep a few large state-run banks which include Punjab National Bank (PNB), Bank of Baroda (BoB), Canara Bank, or State Bank of India.

But as per the latest news, sources told Financial Express that the government is considering a two-pronged strategy to further consolidate public sector banks (PSBs)-merging smaller lenders to create scale and gradually diluting its ownership closer to 51% to enable the banks to raise growth capital independently.

Not just that SBI is open to the next phase of consolation. In November, during an interview with Bloomberg, SBI Chairman Challa Sreenivasulu Setty revealed that another round of consolidation could be practical and beneficial. He said, "Some more rationalisation may make sense. There are still a few smaller, sub-scale banks. If there is another round, it may not be a bad idea."

List Of Major Bank Mergers:

1. State Bank Of India (April 2017)

SBI became the largest PSU bank after merging six of its own associate banks namely State Bank of Bikaner And Jaipur, State Bank of Hyderabad, State Bank of Patiala, State Bank of Mysore, State Bank of Travancore, and Bharatiya Mahila Bank.

2. Bank of Baroda (April 2019)

BoB became the second largest bank in PSUs after merging Vijaya Bank and Dena Bank.

4. Punjab National Bank (PNB) (April 2020)

Further, PNB took Oriental Bank of Commerce and United Bank of India, which led the lender to become third largest PSU bank in India.

4. Canara Bank merger with Syndicate Bank (April 2020): Canara became fourth largest PSU lender.

5. Indian Bank merged with Allahabad Bank (April 2020). Indian Bank is now the seventh largest bank due to this merger.

6. Union Bank of India merged with Corporation Bank and Andhra Bank. (April 2020). After the acquisition, Union Bank emerged as the fifth largest PSU lender in India.

What Is Bank Merger?

A bank merger is a corporate restructuring process where two or more banks combine into a single entity. Usually, this consolidation process often results in a larger bank absorbing smaller banks. Bank mergers are extremely complex processes that involve legal, financial, and operational integrations between the merging entities, as per Angel One blog.

Which Banks Are Yet To Be Merged?

The six banks that are not merged yet are --- Indian Overseas Bank, Bank of India, Bank of Maharashtra, Central Bank of India, UCO Bank, Punjab & Sind Bank.

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