From 27, the number will drop to 12, leaving just four remaining! Why does the government want to merge public sector banks? Which banks will be closed? What will be the impact on you?

PSU Bank Merger: The Indian government is moving towards major banking reforms. To strengthen the financial position of Indian banks, balance their losses, and bring them to global standards, preparations are underway to merge smaller public sector banks. 

The Finance Ministry is preparing a proposal for the mega bank merger, which will soon be presented to the Cabinet. The aim of this bank merger is to create banks that are stronger, more stable, and able to compete internationally. 

Several public sector banks may be merged to make them more capital-sound and reduce their NPAs. The banks included in this list include these. 

Which banks can be merged?  

It is believed that Indian Overseas Bank (IOB), Central Bank of India (CBI), Bank of India (BOI), Bank of Maharashtra (BOM), UCO Bank, and Punjab and Sind Bank could be merged. 

Preparations are also underway to merge Union Bank and Bank of India. This merger could create the country's second-largest public sector bank. 

This proposal will first be sent to the Cabinet and then to the Prime Minister's Office (PMO). A decision will be made only after reviewing every aspect. However, the picture regarding which bank will merge with which is currently unclear.  

Only these 4 government banks will remain in the country 

If the bank mergers are approved, the country will be left with only four public sector banks. Except for the State Bank of India (SBI), Canara Bank, Punjab National Bank (PNB Bank), and Bank of Baroda, all other banks could be merged. 

Sources suggest that smaller banks could be merged with the four largest public sector banks, creating larger ones. It should be noted that the NITI Aayog had previously recommended bank mergers. 

The NITI Aayog recommended that only a few large public sector banks, such as SBI, PNB, BOB, and Canara Bank, be kept under government control. The remaining public sector banks should either be merged or privatized.   

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What will be the impact of bank merger?  

The merger of these banks will impact millions of account holders and 229,800 employees. Thousands of bank branches could be closed due to the merger. 

Despite the government's claims that employees won't lose their jobs, many branches will undoubtedly close when these banks merge. 

The increased number of employees performing similar tasks will increase competition, impacting promotions and salary increases. Employees may face the pain of transfers. The banking sector will also see fewer job openings.   

SBI Chairman Challa Srinivasulu Setty has expressed support for bank mergers. In an interview with Bloomberg, he supported banking mergers, stating that merging more banks could be prudent. He cited the fact that some smaller banks are still unable to scale. He added that merging  

Which banks have been merged?  

This won't be the first time public sector banks will be merged. Several mergers have taken place before. In 2019, the government merged several banks under the Mega Bank Consolidation Plan. The number of banks in the country decreased from 27 to 12.  

1. In 2017, six banks merged into the country's largest bank, the State Bank of India. Bharatiya Mahila Bank, State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala, and State Bank of Travancore were merged into SBI.  

2. Similarly, in April 2019, Vijaya Bank and Dena Bank were merged with Bank of Baroda.  

3. In August 2019, Oriental Bank of Commerce and United Bank of India were merged with PNB.  

4. In August 2019, Andhra Bank and Corporation Bank were merged with Union Bank of India and Allahabad Bank was merged with Indian Bank.