PSU Banks Merger: Should Big Banks SBI, PNB, & BOB Take Part In Next Merger? BOI, IOB, BOM, UCO In Focus

The PSU bank merger is back in the limelight, and the next phase of consolidation is likely to include the unmerged and single entities like Indian Overseas Bank, Bank of Maharashtra, Bank of India, Central Bank of India, Punjab & Sind Bank, and Bank of India. However, the government seeks to have fewer but larger and stronger banks that could bring the PSUs on the map in global rankings. Currently, only HDFC Bank and SBI are in the top 100 world banks list.

Fewer & Bigger PSU Banks!

Many reports have said the government could have just four or six PSU banks.

This signals that big banks like State Bank of India, Bank of Baroda, Union Bank of India and Punjab National Bank may have to merge more than they already have.

From 2017 to 2020, the government merged 10 PSU banks into four major banks, which lowered the number of banks to 12 from the earlier 27.

What Should Be The Mechanism Of Next Phase Of PSU Bank Merger?

Dinesh Kumar Khara, former chairman of State Bank of India, in a discussion with CNBC-TV18, said "I would like to subscribe to the view that if at all a merger has to happen, the merger should actually lead to strengthening of the growth levers in the banks. Which means that unless and until there is a synergy which will flow post-merger, it may not really yield the desired results."

If all the merger has to happen, then as per Khara, focus should be on subsequent growth at a significantly higher level. For this, Khara pointed out the requirement of stronger muscles is essential, which is derived from stronger muscles that essentially come from the skill, technology, and ability to take risk and consolidation of the capital.

Khara's statement also comes at a time when the current SBI Chairman Challa Sreenivasulu Setty in an interview with Bloomberg said, another round of consolidation could be practical and beneficial.

Setty added, "Some more rationalisation may make sense. There are still a few smaller, sub-scale banks. If there is another round, it may not be a bad idea."

Top PSU Bank Mergers List:

Here are the biggest mergers of PSU Banks since 2017:

1. State Bank Of India (April 2017)

The largest PSU lender merged six of its own associate banks namely State Bank of Bikaner And Jaipur, State Bank of Hyderabad, State Bank of Patiala, State Bank of Mysore, State Bank of Travancore, and Bharatiya Mahila Bank. This made SBI the largest PSU bank in India.

2. Bank of Baroda (April 2019)

Bank of Baroda emerged as the second largest bank in PSUs after merging Vijaya Bank and Dena Bank.

3. Punjab National Bank (PNB) (April 2020)

PNB merged Oriental Bank of Commerce and United Bank of India, which led the lender to become second largest PSU bank in India.

Notably, in 2020, a series of PSU bank consolidations took place. These are:

4. Canara Bank merger with Syndicate Bank (April 2020).

5. Indian Bank merged with Allahabad Bank (April 2020).

6. Union Bank of India merged with Corporation Bank and Andhra Bank. (April 2020).

What Is Bank Merger?

Bank mergers are significant events that can help struggling banks become more competitive by enhancing efficiency, competitiveness, and stability. India has witnessed several key mergers both in the public and private sector space in the recent past, as per Angel One.

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