SBI, PNB, BoB: Why Only Four Public Sector Banks May Remain After the Next Merger
India ’s banking landscape is on the brink of another historic transformation. The central government is reportedly preparing for a major new round of public sector bank mergers, a move aimed at creating a handful of globally competitive financial institutions capable of driving large-scale credit growth and economic expansion. According to recent reports, the Finance Ministry is considering merging several mid-sized public sector banks into four mega-banks — State Bank of India ( SBI ), Punjab National Bank ( PNB ), Bank of Baroda (BoB), and Canara Bank — which will remain as the core pillars of India’s public banking sector.
This merger initiative, informally referred to as “Bank Merger 2.0,” is part of the government’s long-term strategy to consolidate smaller and weaker banks to improve efficiency, strengthen balance sheets, and make the system more resilient to global economic pressures.
The primary goal is to reduce duplication, enhance operational efficiency, and ensure that each major bank has the financial strength to support large infrastructure projects, corporate lending, and global partnerships. A streamlined structure, the government believes, will help these institutions compete more effectively with private and foreign banks while maintaining financial stability.
If the plan moves forward as expected, India’s banking map will undergo another major reshaping—leaving the nation with just four large public sector banks.
Bank of Maharashtra (BoM)
These institutions could be absorbed into stronger entities like Punjab National Bank (PNB), Bank of Baroda (BoB), and State Bank of India (SBI). The rationale behind this move lies in improving asset quality, strengthening risk management systems, and optimising branch networks to serve customers more efficiently.
Such mergers would also help reduce overlapping operations, allowing the merged entities to focus on digital transformation, loan recovery, and expanding credit to priority sectors such as agriculture, MSMEs, and infrastructure.
Some key mergers during that period included:
These mergers were intended to strengthen the sector by creating banks with larger balance sheets and broader operational reach. They also helped to standardise technology platforms and improve capital adequacy ratios.
By merging smaller banks, the government aims to:
Enhance global competitiveness: Consolidated institutions can compete on an international scale and support India’s growing trade and investment ties.
Leverage technology: Unified digital systems and customer databases can improve service quality and operational consistency.
Experts believe that creating a few large, well-capitalised banks will allow India to emulate models seen in countries like China and the U.S., where a handful of major banks dominate lending and investment.
Punjab National Bank (PNB) – The country’s second-largest public sector bank post the 2019 mergers.
Bank of Baroda (BoB) – Strengthened after absorbing Dena Bank and Vijaya Bank.
Canara Bank – Reinforced through the merger with Syndicate Bank, it has since emerged as a strong player in retail and corporate banking.
This means other mid-sized and small banks such as Bank of India, Indian Overseas Bank, and Central Bank of India could be absorbed into these larger institutions, leading to a simpler, more consolidated public banking structure.
Moreover, experts caution that merging weaker banks with stronger ones must be done strategically to prevent the dilution of capital and management bandwidth. Regulatory readiness, clear communication, and careful execution will be crucial to ensuring a smooth transition under the new plan.
The merger plan also aligns with global banking trends, where countries are favouring fewer but stronger institutions that can manage risk better and adapt swiftly to changing market conditions.
If successfully implemented, the upcoming mergers will mark a new era in Indian banking—one defined by financial strength, technological innovation, and international competitiveness.
This merger initiative, informally referred to as “Bank Merger 2.0,” is part of the government’s long-term strategy to consolidate smaller and weaker banks to improve efficiency, strengthen balance sheets, and make the system more resilient to global economic pressures.
The Government’s Vision for Stronger Banks
The Indian government has been pursuing bank consolidation for several years to create institutions that can operate efficiently on both domestic and international levels. Finance Minister Nirmala Sitharaman , speaking at the 12th SBI Banking and Economics Conclave, recently hinted that further mergers among public sector banks were under active consideration.The primary goal is to reduce duplication, enhance operational efficiency, and ensure that each major bank has the financial strength to support large infrastructure projects, corporate lending, and global partnerships. A streamlined structure, the government believes, will help these institutions compete more effectively with private and foreign banks while maintaining financial stability.
If the plan moves forward as expected, India’s banking map will undergo another major reshaping—leaving the nation with just four large public sector banks.
The Banks That May Be Merged
As part of this proposed consolidation, the government is reportedly considering merging:- Indian Overseas Bank (IOB)
- Central Bank of India (CBI)
- Bank of India (BOI)
Such mergers would also help reduce overlapping operations, allowing the merged entities to focus on digital transformation, loan recovery, and expanding credit to priority sectors such as agriculture, MSMEs, and infrastructure.
Learning from the 2019 Merger Wave
This is not the first time the Indian banking sector has witnessed such a large-scale consolidation. In August 2019, the government announced one of the most ambitious merger plans in the history of Indian banking. The move reduced the number of public sector banks from 27 in 2017 to just 12 by April 1, 2020.Some key mergers during that period included:
- United Bank of India and Oriental Bank of Commerce merged with Punjab National Bank (PNB).
- Syndicate Bank merged with Canara Bank.
- Allahabad Bank merged with Indian Bank.
- Andhra Bank and Corporation Bank merged with Union Bank of India.
- Earlier in 2019, Dena Bank and Vijaya Bank were merged with Bank of Baroda.
These mergers were intended to strengthen the sector by creating banks with larger balance sheets and broader operational reach. They also helped to standardise technology platforms and improve capital adequacy ratios.
Why Consolidation Makes Sense Now
The renewed focus on consolidation stems from the government’s desire to ensure that India’s public sector banks can handle the demands of a rapidly expanding economy. The country’s banking sector is expected to play a central role in financing upcoming infrastructure projects, renewable energy transitions, and technological innovation.By merging smaller banks, the government aims to:
- Improve operational efficiency: Merged entities can pool resources, reduce redundancy, and enhance profitability.
- Strengthen balance sheets: Larger banks are better equipped to absorb shocks from non-performing assets (NPAs).
How Many Banks Will Remain?
If the government completes this merger process within the proposed timeline, the number of public sector banks will drop even further—from 12 to just four major entities. The anticipated survivors of this consolidation drive will be:- State Bank of India (SBI) – India’s largest lender and the backbone of the public sector banking system.
Challenges Ahead for Bank Merger 2.0
While the plan has ambitious goals, it is not without challenges. Past mergers have highlighted the difficulties of integrating different work cultures, technology systems, and customer service frameworks. Employee unions have often raised concerns about job security and branch rationalisation, while customers sometimes face temporary disruptions during integration.Moreover, experts caution that merging weaker banks with stronger ones must be done strategically to prevent the dilution of capital and management bandwidth. Regulatory readiness, clear communication, and careful execution will be crucial to ensuring a smooth transition under the new plan.
A Step Toward a Stronger Banking Future
Despite the challenges, this consolidation is widely seen as a strategic move to strengthen India’s financial backbone. Larger and better-capitalised banks will be able to provide long-term project loans, expand credit to rural areas, and support India’s target of becoming a $5 trillion economy.The merger plan also aligns with global banking trends, where countries are favouring fewer but stronger institutions that can manage risk better and adapt swiftly to changing market conditions.
If successfully implemented, the upcoming mergers will mark a new era in Indian banking—one defined by financial strength, technological innovation, and international competitiveness.
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