PSU Banks Merger New Update: What Govt May Announce In Budget For IOB, UCO, BOI, BOM, Central Bank, PSB Merger

The upcoming Budget 2026 is likely to hold key decisions for public sector banks that are on the radar to merge. As per a report, the government is looking into a two-pronged strategy for consolidating PSU banks. These include merging smaller banks and then gradually diluting their ownership closer to 51% in them. Currently, six PSU banks are trading as single entities. They have never been merged!

Which PSU Banks Are Not Merged?

The six banks that are not merged yet are --- Indian Overseas Bank, Bank of India, Bank of Maharashtra, Central Bank of India, UCO Bank, Punjab & Sind Bank.

PSU Banks Expectations In Budget 2026?

Sources familiar with the development told Financial Express that the government is considering a two-pronged strategy to further consolidate public sector banks (PSBs)—merging smaller lenders to create scale and gradually diluting its ownership closer to 51% to enable the banks to raise growth capital independently.

These sources told the news agency that with the discussions on the matter, this mix of consolidation and calibrated dilution of the government's stake is essential to build banks capable of funding the expanding credit needs of a fast-growing economy.

It is expected that five of the smallest PSBs could be merged with mid-sized banks to make them to the largest PSU lender, State Bank of India. SBI is on RBI's 'too big to fail' bank list and is not only the largest government-run company but also the largest PSU bank in India.

Recently, in the winter session at Lok Sabha, Minister of State for Finance Pankaj Chaudhary said, "Presently, no proposal on merger or consolidation of Public Sector Banks (PSBs) is under consideration of the Government."

Here are the biggest PSU Banks Merger:

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

2. April 2019

Bank of Baroda + Vijaya Bank + DENA Bank

3. April 2020

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

4. April 2020:

Canara Bank + Syndicate Bank

5. April 2020:

Union Bank of India + Andhra Bank + Corporation Bank

6. April 2020

Indian Bank + Allahabad Bank

According to an earlier report of Bajaj Broking, once a PSU bank merger is finalized, both the anchor bank and its customers undergo significant changes. If you are a customer of any merged entity, it is important to understand what terms apply after the consolidation.