India’s mega bank merger plan could leave just four state-run banks; Details inside

This is not the first time the government is merging banks. Between 2017 and 2020, the central government merged 10 public sector banks to form four large banks. At that time Oriental Bank of Commerce and United Bank of India were merged with PNB.

New Delhi: The Indian government is preparing for another major change in the banking sector. It is reported that the central government is working on a mega merger plan for public sector banks. This proposal recommends merging smaller public sector banks with larger ones. This suggestion is based on the recommendations of the NITI Aayog and, if approved, will result in only four large public sector banks in the country in the coming years.

Which Banks Could Be Merged?

According to media reports, the government is considering merging banks including Indian Overseas Bank (IOB), Central Bank of India, Bank of India (BOI), and Bank of Maharashtra.

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The plan is to merge these banks with the country's larger public sector banks—State Bank of India (SBI), Punjab National Bank (PNB), and Bank of Baroda (BoB).

According to sources, the "Record of Discussion" for this proposal has been prepared and is now being prepared to be sent to the Cabinet meeting and the Prime Minister's Office (PMO). If the plan is approved, the merger could be completed by the financial year 2026-27.

What Will Be Impact On Customers?

Customers may face some changes after the merger. For example,

• They may need to obtain new documents, checkbooks, passbooks, and ATM cards related to their bank accounts.
• Old account data and balances will be transferred to the new bank.
• Changes to branches and IFSC codes are also possible.

However, banks generally provide customers with convenience and sufficient time during this process to avoid inconvenience.

What Is Government's Plan?

The government believes that the banking system is under increasing pressure due to the rising expenses and NPAs (non-performing assets) of smaller banks.

Mergers will strengthen banks' financial position, increase lending capacity, and enable the banking system to compete globally.

The government also believes that larger banks will be able to provide faster and safer services to customers through better management and technological improvements.

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Such Mergers Have Happened Before

This is not the first time the government is merging banks. Between 2017 and 2020, the central government merged 10 public sector banks to form four large banks. At that time Oriental Bank of Commerce and United Bank of India were merged with PNB. Allahabad Bank merged with Indian Bank. Syndicate Bank was merged with Canara Bank. While Corporation Bank and Andhra Bank were merged with Union Bank of India.

How Many Banks Will Remain In Country?

If this new merger plan is implemented, only four public sector banks will remain in India—

• State Bank of India (SBI)
• Punjab National Bank (PNB)
• Bank of Baroda (BoB)
• Canara Bank

This move by the government is being considered a major reform towards making the banking sector stronger and more competitive.