PSU Banks Merger: IOB, BOM, Central Bank, PSB, UCO On Alert: Can SBI Take More Banks? Who Will Merge Next?

PSU banks such as Indian Overseas Bank, UCO Bank, Central Bank of India, Bank of Maharashtra, Punjab & Sind Bank, and Bank of India are on high alert as the Finance Ministry and RBI evaluate the next phase of public sector bank mergers. The government wants fewer but world-scale banks in PSUs. At the latest update, the largest PSU lender of India, State Bank of India (SBI) has likely hinted at participating in the fresh round of bank consolidation. However, on November 20, PSU bank stocks are trading under pressure.

Will SBI Take More Banks?

In a latest 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."

SBI was the first experiment when the banks consolidation idea was sparked in 2017. The idea of having fewer but stronger PSU banks was first introduced by former Finance Minister Arun Jaitley. In April 2017, SBI merged its six associate banks, and became the largest PSU bank of India.

But with the fresh round of consolidation, SBI seeks to earn more.

Setty revealed that SBI is not here to just protect its market share, they want to increase more. The competition from SBI's private and foreign rivals does not worry Setty.

As of now, this PSU lender controls about one-fourth of India's Rs 194 trillion ($2.18 trillion) credit market. This makes SBI one of the single-most influential player in financial market of India.

It also needs to be noted that currently only HDFC Bank and SBI are in the world's top 100 banks list in terms of assets. India does need stronger and global-scale banks, compared to US and China whose large institutions are dominating the top rankings.

As of September 2025, SBI's gross advances stood at Rs 44,19,674 crore, while deposits are at Rs 55,91,700 crore. Meanwhile, gross non-performing assets is at 1.73%. By end of Q2FY26, SBI crossed Rs 100 trillion business turnover with RAM portfolio crossing Rs 25 trillion mark.

Top PSU Bank Mergers List:

From 2017 to 2020, the government has merged 10 PSU banks into four larger entities. This reduced the number of banks significantly to 12 currently from 27 earlier.

Here are the biggest mergers of PSU Banks since 2017:

1. State Bank Of India (April 2017)

The largest PSU lender merged 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. This made SBI the largest PSU bank in India.

2. Bank of Baroda (April 2019)

Bank of Baroda emerged as the second largest bank in PSUs after merging Vijaya Bank and Dena Bank.

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

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

Notably, in 2020, a series of PSU banks consolidation took place. These are:

4. Canara Bank merger with Syndicate Bank (April 2020).

5. Indian Bank merged with Allahabad Bank (April 2020).

6. Union Bank of India merged with Corporation Bank and Andhra Bank. (April 2020).

Which PSU Banks Are Not Merged?

There are six banks who are not merged and operating as independent entities. These are:

1. Indian Overseas Bank

2. UCO Bank

3. Central Bank of India

4. Bank of Maharashtra

5. Bank of India

6. Punjab & Sind Bank

Which Could Be Next PSU Bank Merger?

As per PL Capital who cited other media reports, said that officials quoted in the report said that the government's long-term objective is to reduce the number of PSU banks from the current 12 to about 6-7 larger, more competitive institutions. The consolidation will focus on building lenders with stronger balance sheets, improved lending capacity and better operational efficiency-particularly to support India's expanding infrastructure pipeline.

Also, the government is expected to monitor key operating metrics for at least two additional quarters before finalising merger combinations. Early candidates identified by analysts include UCO Bank, Punjab & Sind Bank, Indian Overseas Bank, Central Bank of India, Bank of Maharashtra and Bank of India. These lenders may either undergo smaller-bank mergers first or be directly integrated into large anchor banks such as SBI or Punjab National Bank (PNB).

PSU Bank Stocks:

At the time of writing, Nifty PSU Bank index dropped by 11.30 points or 0.13% to trade at 8,565.10. 9 stocks on Nifty PSU Bank index are down compared to 3 advances.

Among the top losers are --- Bank of Maharashtra, UCO Bank and Punjab & Sind Bank who have recorded 1.3% to 1.5% decline. Stocks like Central Bank of India, Indian Overseas Bank, and Bank of India plunged by 0.5% to 0.9%. Additionally, SBI, Union Bank of India and Canara Bank are marginally lower.

However, the gains were mild as well. Indian Bank, Punjab National Bank and Bank of India are in green but with restrained upside.

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