PSU Banks Merger: Full List Of Next Bank Mergers: Who Will Take IOB, BOI, BOM, UCO, Central Bank & More?

Who are the next PSU banks to merge? An answer to this question is much awaited. Currently, there are six public sector banks, like Indian Overseas Bank, Central Bank of India, UCO Bank, Bank of India, Bank of Maharashtra, Bank of India, and Punjab & Sind Bank, that are on the radar for the next phase of bank consolidation. The potential candidate to take these banks could be SBI, Bank of Baroda, PNB, Canara Bank or Union Bank.

Next PSU Banks Merger?

Earlier, 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.

Recently a source was cited by Money Control that the current plan builds on those recommendations but adapts them to present conditions. The sources said, "With fintech expanding rapidly and private banks growing in scale, the idea is to position PSBs strategically rather than spread them thin."

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.

In the early days of this month, Finance Minister Nirmala Sitharaman said India needs "a lot of big, world-class banks" to meet the growing needs of a fast-expanding economy. She revealed that the ministry will need to sit and discuss with the Reserve Bank of India (RBI) and banks on how they want to take it forward.

Potential PSU Banks Merger: Full List

As per reports, Indian Overseas Bank could be merged with either SBI or PNB as it will help scale stronger balance sheet, while Central Bank of India could be taken over by PNB or BoB as it brings better capital mix and wider reach.

Further, there is potential of Bank of India to be taken over by SBI or BoB as it will reportedly improve credit capacity. Also, PNB or BoB are reportedly potential candidate to take Bank of Maharashtra as it will reduce overlap and bring in efficiency.

Earlier there were reports that suggested that the government is expected to monitor key operating metrics for at least two additional quarters before finalising merger combinations. Early candidates identified by analysts include UCO Bank, Punjab & Sind Bank, Indian Overseas Bank, Central Bank of India, Bank of Maharashtra and Bank of India. These lenders may either undergo smaller-bank mergers first or be directly integrated into large anchor banks such as SBI or Punjab National Bank (PNB).

The largest lender SBI has already expressed its interest to participate in the next phase of banks merger if needed for increasing more market growth.

It needs to be noted that these are just reports' speculations and suggestions, and the government is yet to reveal the details related to the next phase of bank merger. Hence, GoodReturns cannot confirm the same.

Banks Q2FY26 Performance:

As per CARE EDGE report, the net profit of PSBs recorded a y-o-y growth rate of 4.7%, as compared to a decline of 2.1% y-o-y for Private Sector Banks (PVBs), reaching Rs 0.50 lakh crore and Rs 0.44 lakh crore, respectively, in Q2FY26. The rise in PSB profits is mainly attributed to fee income and treasury gains, alongside credit growth in the retail and MSME segments, and normalised operating expenses. Additionally, if included the stake sale impact, net profit for large PSBs would grow by 8.9% y-o-y.

Also, Return on Assets (RoA, annualised) of SCBs reached 1.29% in Q2FY26, declining by 11 bps y-o-y, attributed to margin pressures due to rate cuts. Under this, RoA for SCBs rose sequentially by one bp, driven by PSBs, attributed to slightly increased margins in the current quarter, business growth and overall improvement in the asset quality.