PSU Banks Merger Buzz Lift Public Sector Bank Stocks: IOB, BOI, BOM, UCO, Central Bank On Radar For Merger

PSU Bank stocks started the month of December with a banger. Bulls lifted Nifty PSU Bank to rally by over 1% and touched new 52-week high on December 1st. All stocks traded higher. Public sector banks are in focus due to the next phase of merger. Stocks like Indian Overseas Bank, UCO Bank, Bank of Maharashtra, Punjab & Sind Bank, Bank of India, and Central Bank of India are the only six-single entities who have not been merged. Large banks like Bank of Baroda, Punjab National Bank and State Bank of India (SBI) are in focus for merging these banks. It is expected that next PSU banks merger could take place in 2026.

PSU Bank Stocks:

At the time of writing, Nifty PSU Bank index surged by 0.97% or 82.35 points to trade at 8,596.75. The index touched an intraday high of 8,628.60, which is a new all-time high. Overall, Nifty PSU Bank index has surged by 5.3% in past 30-days.

All PSU bank stocks are up on December 1st. Bank of Baroda (BoB) is leading the rally with 2.33% upside, followed by Indian Bank, Union Bank of India, Central Bank of India, Punjab & Sind Bank, UCO Bank, Indian Overseas Bank, and SBI with gains of 0.5% to 2%. Stocks like Bank of India, Canara Bank and Bank of Maharashtra are also in green with marginal growth.

Which Banks Are Not Merged?

- Bank of India

- Indian Overseas Bank

- Central Bank of India

- Bank of Maharashtra

- UCO Bank

- Punjab & Sind Bank

These six banks are yet to be merged as part of the government's vision for fewer but world-class state-run banks.

Big Bank Mergers in India From 1993 To 2025

In more than three decades, the Indian financial system has seen significant transformation, and merger of two or multiple banks to form one uniform and strong bank is part of this paradigm shift.

Here are some of the important banks merger since 1993:

1. April 2017

SBI + State Bank of Bikaner And Jaipur + State Bank of Hyderabad + State Bank of Patiala + State Bank of Mysore + State Bank of Travancore + Bharatiya Mahila Bank

In April 2017, SBI merged six of its associate banks, becoming the largest PSU bank in the country. SBI was the first experiment when the banks consolidation idea was sparked in 2017. The idea of having fewer but stronger PSU banks was first introduced by former Finance Minister Arun Jaitley.

2. April 2019

Bank of Baroda + Vijaya Bank + DENA Bank

Baroda Bank added the two banks under its ambit, which led the bank to become third largest PSU bank in India.

3. April 2020

Punjab National Bank + Oriental Bank of Commerce + United Bank of India

By merging Oriental Bank of Commerce and United Bank of India, PNB became the second-largest PSU bank in terms of branch network.

4. April 2020:

Canara Bank + Syndicate Bank

This Bengaluru-based bank is now the fourth largest public sector bank in India after it merged Syndicate Bank.

5. April 2020:

Union Bank of India + Andhra Bank + Corporation Bank

Union Bank became the fifth largest PSU lender in India after merging with Andhra and Corporation Banks.

6. April 2020

Indian Bank + Allahabad Bank

Because of merging Allahabad Bank in its network, Indian Bank is now the seventh largest PSU bank of the country.

Who Are Next PSU Banks Merger?

A Niti Aayog report suggested the government either privatize or restructure smaller banks like Central Bank of India and Indian Overseas Banks. The country's think tank believes that the Indian government should keep a few large state-run banks which include Punjab National Bank (PNB), Bank of Baroda (BoB), Canara Bank, or State Bank of India.

While the rest of the smaller state-run banks could be either opt for privatisation or merges or reducing government stake in them.

As per various reports, a proposal to merger Indian Overseas Bank, Central Bank, Bank of India and Bank of Maharashtra with large lenders like PNB, Baroda Bank or SBI has been drawn up.

The talks for next phase of public sector banks merger is expected through FY27. The upcoming Budget 2026 will also be keenly watched for any announcement related to merger.

It is expected that the government could keep only 4-7 fewer but large banks after completing PSU banks merger.

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