PSU banks surged by as much as 3% during Monday’s trading session following news that the government is preparing a new plan to merge certain public sector banks and privatize smaller lenders.
The Indian government is formulating a strategy to combine Union Bank of India and Bank of India, both located in Mumbai, as part of its recent banking reform efforts, according to Mint, which cited sources familiar with the situation. If accomplished, this merger would result in the formation of the second largest state-owned bank in the country, following the State Bank of India (SBI), the report noted.
This initiative is part of the government’s goal to enhance the banks and optimize overlapping functions within the banking industry over the coming years, the report added.
Additionally, the Finance Ministry is exploring the possibility of merging Indian Overseas Bank and Indian Bank, based in Chennai, as indicated by sources, according to Mint. Furthermore, Punjab & Sind Bank (PSB) and Bank of Maharashtra, which hold fewer assets compared to other major public sector banks, are being considered for privatization in the future, the report stated.
On October 15, Moneycontrol reported exclusively that the Indian banking sector is on the verge of another round of consolidation among public sector banks, with the government planning a significant merger that may bring together smaller banks with larger ones.
The objective is to refine the public sector banking framework, aiming for a smaller number of more robust institutions capable of facilitating the next stage of credit growth and reforms in the financial sector, according to a source.
Indian Overseas Bank (IOB), Central Bank of India, Bank of India (BOI), and Bank of Maharashtra (BOM) might be integrated with larger banks like Punjab National Bank (PNB), Bank of Baroda (BoB), and State Bank of India (SBI), as per government insiders.
From 2017 to 2020, the government combined 10 public sector banks into four larger entities, reducing the number of state-owned banks from 27 in 2017 to 12.
