Six PSU Banks Set for Next Merger Wave in Major Sector Overhaul

India’s banking sector is preparing for another major transformation as the government evaluates a fresh round of Public Sector Bank (PSU) mergers aimed at creating stronger, more efficient, and globally competitive lenders. After the successful consolidation in 2019 that reduced 21 PSU banks to 12, policymakers are now examining six additional banks for potential combinations.

The banks reportedly under consideration include Indian Overseas Bank (IOB), Bank of India (BOI), UCO Bank, Bank of Maharashtra (BOM), Central Bank of India, and Punjab & Sind Bank (PSB). While these institutions have improved financially in recent years, they still lack the scale of larger public-sector giants such as SBI, PNB, and Bank of Baroda. Consolidation is expected to enhance capital strength, improve governance, streamline operations, and expand lending capacity, particularly for infrastructure and MSME sectors.

Analysts suggest several potential merger pairings based on size, regional footprint, and operational synergies. Possibilities include IOB merging with UCO Bank, BOI combining with Central Bank of India, and BOM pairing with Punjab & Sind Bank. These mergers aim to build balanced regional coverage and reduce fragmentation in the PSU banking landscape.

However, experts caution that merging weaker banks may create integration challenges, including cultural alignment, technology harmonization, and customer service continuity. Effective planning, leadership stability, and digital modernization will be crucial for success.

If executed strategically, this next merger wave could strengthen India’s banking ecosystem, helping PSU lenders compete more effectively while supporting the country’s long-term economic and credit growth ambitions.