The Indian government is gearing up for significant changes in the banking sector. Based on the recommendations of NITI Aayog, the central government is working on a plan to merge small public sector banks with larger banks. According to media reports, Indian Overseas Bank, Central Bank of India, Bank of India, and Bank of Maharashtra could be merged with the country’s leading public sector banks: State Bank of India (SBI), Punjab National Bank (PNB), and Bank of Baroda (BoB).
Account holders will need to update their documents, passbooks, checkbooks, and ATM cards when transitioning to the new bank post-merger. However, banks do provide special arrangements in such cases to ensure customer convenience and avoid any issues.
The government aims to strengthen the banking framework by managing increased operational costs and NPAs (Non-Performing Assets) of small public sector banks. The proposed restructuring is expected to improve the banks’ capital position, enhance lending capabilities, and make debts more skilled and competitive.
According to sources, the proposal is now in the ‘discussion record’ and will be sent to the Cabinet and the Prime Minister’s Office for approval. If approved, this mega merger could be completed by financial year 2026-27.
Previously, the government merged ten public sector banks into four major banks between 2017 and 2020. If the current plan succeeds, only four major public sector banks will remain in the country: SBI, PNB, Bank of Baroda, and Canara Bank.
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