About six smaller banks, including Indian Overseas Bank, Central Bank of India, and Bank of India, could be merged with larger banks like SBI, PNB, and Bank of Baroda. Preliminary discussions are underway.
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Banks Merger: The landscape of India’s banking sector could change in the coming years. After nearly five years, the central government is working on a bank restructuring plan, under which some smaller public sector banks could be merged with larger ones. This will reduce the number of PSU banks in the country, but the government believes this move will increase the efficiency of banks across the country. Furthermore, a single large bank will be created in the country.
According to sources, approximately six smaller banks, including Indian Overseas Bank, Central Bank of India, and Bank of India, could be merged with larger banks like SBI, PNB, and Bank of Baroda. Preliminary discussions are underway. After extensive discussions, the government is expected to take a decision on the merger in the next financial year.
The government wants to replace small PSU banks with stronger, larger public sector banks, thus boosting future economic growth. After restructuring, banks will have more funds available, which they can use to disburse more loans. In particular, they will be able to lend for larger projects. Furthermore, the merger will reduce the banks’ operational and administrative expenses.
However, no official information has yet been released by the government regarding the merger of smaller banks. Keep in mind that earlier, NITI Aayog had also recommended to the government that to create a strong banking system in the country, small public sector banks should be merged with big banks, after which mergers are being carried out continuously.
Bank mergers so far
– In April 2017, SBI merged six of its associate banks, including 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, making SBI the country’s largest public sector bank.
– In April 2020, Oriental Bank of Commerce and United Bank of India were merged with PNB, making PNB the second largest PSU bank.
– In April 2019, Vijaya Bank and Dena Bank were merged with Bank of Baroda, making Bank of Baroda the third largest public sector bank in the country.
– Between 2017–2020, several smaller PSU banks were merged with larger banks. Consequently, the number of public sector banks in the country decreased from 27 to 12.
