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Smaller banks to be merged with PNB & Canara Bank in next round of consolidation

Finance ministry officials say mid-sized and small government lenders have been identified for separate merger processes with PNB and Canara Bank.

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New Delhi: The consolidation of public sector banks is expected to get fresh impetus as a few mid-sized and small state-run lenders are being considered for mergers with Punjab National Bank (PNB) and Canara Bank, two senior finance ministry officials told ThePrint.

The mid-sized lenders that have been identified for merger include Allahabad Bank, Andhra Bank, Bank of Maharashtra, Central Bank of India, Indian Overseas Bank, UCO Bank, United Bank of India and Union Bank of India, said one of the officials who didn’t wish to be named.

PNB and Canara Bank will separately lead the merger process with these banks, said the official.

With the Bank of Baroda merger with Vijaya Bank and Dena Bank already underway, the next phase of PSB consolidation is expected to begin early next year, said the second official who also spoke on condition of anonymity.

“The merger process of Bank of Baroda, Vijaya Bank and Dena Bank is going ahead smoothly and is expected to take another year to complete. The second phase of merger will be launched soon, irrespective of which party comes to power,” said the second official.

The official added that the next phase of merger could be taken up simultaneously and in a more aggressive manner.

However, the country’s largest lender State Bank of India, which has already taken its associate banks and Bharatiya Mahila Bank within its fold, is unlikely to be touched in the near future.

Also read: Why political meddling with central banks, like in India, is a terrible idea

PNB’s merger efforts

Last year, Punjab National Bank was in talks with other government banks, with a strong presence in south India, for a possible merger.

However, it aborted the idea with its non-performing assets (NPA) rising to 18 per cent. Besides, the bank hit by the Nirav Modi scandal last year also ran into huge losses. Its NPA level is now down to about 16 per cent.

“It was deferred due to these pressing issues but now that bank has considerably recovered and the acquisition plan will be looked into,” said the first ministry official.

PNB was also in talks with Vijaya Bank for a possible merger.

Consensus on need

Finance minister Arun Jaitley has maintained that his government is keen to bring down the number of public sector banks from 21 to about 6.

The opposition party, Congress, has also underlined the need to reduce the number of public sector banks. In its manifesto for the ongoing Lok Sabha elections, it has said that a “comprehensive review of banking system” was the need of the hour.

“PSBs will continue to implement policies to serve the larger public interest including lending to priority and other disadvantaged sectors that are denied adequate credit,” it added.

Though the Congress-led United Progressive Alliance government had floated the idea of bank consolidation, it failed to carry it forward.

Also read: Improved credit growth doesn’t mean there is an improvement in the health of Indian banks


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  1. The sinking PNB to taking 2 banks down the Pacific ocean so that the crooks in PNB who have high political connections will escape. The government is silent about insurance of depositers money which is covered upto Rs one lakh while the looters money of Mehul Choksi and his gang of 4 together with spineless Board of Directors go scot free. Indian constitution protects the looters, corrupt, money launderers and rapists. This is raping of depositers money

  2. It’s a good late move….But how come loss making BOB and Fraud infested PNB take the lead and submerge other good banks especially Andhra and Canara Bank…..Under it……Politics ….Biased

  3. Mergers are welcome but as a bank employee I would like to suggest on this platform that government should solve wage settlement problem. Presently round of talks between unions and IBA waste so much of time that bank employees get settlement late during every settlement. As per government letters Bank employees are equally government officials but they are not getting salary on par with the central government employees. Salaries of Bank employees is very less as compared to private IT sector and Central government employees. When bank employees go on strike for their just depends of raising wages common public think that Bank employees are already getting more salary why they ask for more. If we compare with nation’s like European countries like Switzerland, Netherlands, Canada their per capita income is more as compared to India. If Bank employees get their just depends on wage settlement full filled the salary which they are getting it will not rest forever in their pockets only, it’s going to distribute downward. Ultimately all are going to benefit. Nation’s prosperity is Bankers prosperity because when common public prospers with bank money ultimately government should give what bank employees deserve. Lawyer income depends on increase in crime and criminals in the society, doctors income depends on increase in the diseases in society but Bankers income depends on prosperity of society.
    Never blame banker for strike because he never wish his customers should suffer due to strike.

  4. Govt make a clear policy towards employees of PSB s ,govt should discuss and clear doubts of unions ,after merger all unions taken at majority ,minority barrier

  5. Last this a loss making BOB acquired Vijaya bank making a gujrati bank control south Canara bank, this time another useless bank like PNB famous for Nirav modi scams is acquiring other south banks

  6. So many banks irresponsible and unaccountable.rationalize the bank’s.with internet netbanking the field service branch can be not obtrusive but lighter on pocket limited to 3 bhk flat size in a city.

  7. Government must know the difference between big bank and strong bank.

    Without cleaning the balance sheets, any merger will make it more messy

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