Smaller lenders to be clubbed with big banks by FY27

FPJ News Service mumbai

India’s banking sector is headed for another round of public sector bank consolidation with the government working on a mega merger that could see smaller lenders being merged with larger banks, according to a Moneycontrol report on Wednesday. The idea is to streamline the PSB landscape to have fewer, stronger entities that can support the next phase of credit expansion and financial sector reforms, a source said.

According to the report, Indian Overseas Bank (IOB), Central Bank of India (CBI), Bank of India (BOI) and Bank of Maharashtra (BOM) could be merged with big banks such as Punjab National Bank (PNB), Bank of Baroda (BoB) and SBI, government sources said.

“A proposal to merge Indian Overseas Bank (IOB), Central Bank of India (CBI), Bank of India (BOI) and Bank of Maharashtra with larger lenders such as Punjab National Bank, Bank of Baroda and State Bank of India has been drawn up,” one of the sources cites above said.  “A record of discussion on the plan will first be taken up by senior officials at the Cabinet level and then will be examined by the PMO.” 

Discussions are expected to continue in FY27, “with a view to finalising the roadmap within the same year”. FY27 is likely to be an indicative timeline to allow for consultations and seek the view of the banks involved. “The government wants to build consensus internally before making any formal announcements,” the source quoted above said.