Canara Bank Union Bank Merger News: Govt may move towards PSU Banking Consolidation

Canara Bank Union Bank Merger News: Govt may move towards PSU Banking Consolidation

Government of India is reportedly working on a major restructuring plan for public-sector banks (PSBs), and if executed, the total number of state-owned banks may shrink from the current 12 to just four by FY 2027.

As per a report cited by Money Control, the big plan includes forming a new banking giant through the merger of Canara Bank and Union Bank of India.

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Under the proposal, four major lenders will emerge as the backbone of the public banking network — State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BoB) and the newly combined entity of Canara Bank and Union Bank.

The objective is to create stronger, more competitive banks capable of handling large-scale lending and supporting India’s rapidly expanding economy.

Government officials are also evaluating the possibility of integrating Indian Bank and UCO Bank into this new structure. Meanwhile, other mid-sized banks — including Indian Overseas Bank, Bank of India, Central Bank of India and Bank of Maharashtra — may be aligned with SBI, PNB or BoB in subsequent phases. A final call on Punjab & Sind Bank is still pending.

Before any merger moves forward, the proposal must pass multiple approval layers — beginning with the Finance Minister, then scrutiny by senior financial authorities, a review from the Prime Minister’s Office, and regulatory checks by SEBI, given the potential impact on the stock market.

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According to officials, the goal is to build banks with the strength to support major infrastructure financing, reduce operational duplication and improve capital efficiency.

They believe that consolidation may be smoother this time as PSBs currently hold healthier balance sheets and have gained experience from the 2017–2020 merger wave that reduced the number of state-run banks from 27 to 12.

If approved, this could mark the country’s second major phase of banking consolidation, shaping a stronger and globally competitive public-sector banking system.