Modi Government Plans Major Bank Merger: Smaller PSBs may merge with SBI, PNB, and BoB

Modi Government Plans Major Bank Merger: Smaller PSBs may merge with SBI, PNB, and BoB

Modi Government is planning to merge smaller lenders with larger banks, according to a news report by Moneycontrol.

This merger planning aims to simplify the structure of public sector banks (PSBs), reduce overlaps, and create fewer but financially stronger institutions capable of driving credit growth and supporting broader economic reforms.

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As per early discussions, banks such as the Indian Overseas Bank (IOB), Central Bank of India (CBI), Bank of India (BOI), and Bank of Maharashtra (BOM) could be merged with larger players like Punjab National Bank (PNB), Bank of Baroda (BoB), and State Bank of India (SBI).

Government sources indicated that the proposal is still in its initial stage and will be taken up for review by senior officials at the Cabinet level.

The merger roadmap is expected to take effect by FY27, giving the government sufficient time to hold consultations with stakeholders and build internal consensus before making a formal announcement.

This merger is based on NITI Aayog’s recommendations, which suggested restructuring or privatizing smaller and weaker PSBs like IOB and CBI that are already on the list for potential strategic sale.

If approved, this will be a bigger step in India’s ongoing financial sector reforms.