The discussion around another major round of PSU bank mergers has resurfaced as the government aims to create stronger, globally competitive public sector banks that can rank among the world’s top 100. India’s largest lender, State Bank of India (SBI), is also backing the next phase of consolidation to enhance market strength and valuation.
Objective Behind the New Merger Wave
The government’s focus remains on reducing the total number of PSU banks while strengthening the financial system. The key aims of the 2026 consolidation plan include:
- Strengthening financial books of weaker banks
- Reducing non-performing assets (NPAs)
- Enhancing digital and physical banking infrastructure
- Achieving global competitiveness
- Expanding operational efficiency and productivity
This consolidation, if approved, will continue the series of mergers carried out from 2017 to 2020, which had earlier reduced the number of PSU banks from 27 to 12.
Which Banks Are Yet to Be Merged?
As of now, six public sector banks remain standalone entities. These banks are expected to be part of discussions for the next merger phase scheduled around April 2026:
- Indian Overseas Bank (IOB)
- Bank of India (BOI)
- Bank of Maharashtra (BOM)
- Central Bank of India
- UCO Bank
- Punjab & Sind Bank (PSB)
These banks have not been merged in any of the previous consolidation rounds and remain under review for future restructuring.
Why More Mergers?
Economic experts highlight multiple reasons for continuing the consolidation:
- Bigger banks can compete internationally
- Stronger balance sheets help absorb economic shocks
- Greater efficiency in capital allocation
- Enhanced customer service through modern digital solutions
- Increased global investor confidence
The government’s long-term vision is to have a smaller number of large, globally recognized Indian banks similar to banking systems in China and the US.
Background: PSU Mergers So Far (1993–2025)
India has seen multiple merger phases, including:
- SBI merging with its five associate banks
- Vijaya Bank & Dena Bank merging with Bank of Baroda
- Punjab National Bank absorbing OBC & United Bank
- Canara Bank merging with Syndicate Bank
- Indian Bank merging with Allahabad Bank
Each phase has helped reduce duplication, improve efficiency and bring stronger governance.
The proposed 2026 mergers will likely be the next major step in India’s banking sector restructuring.
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