SBI, PNB, BOI: Is India Moving Towards Just Four Public Sector Banks?

The Indian government is considering a significant restructuring of the banking framework by merging smaller public sector banks (PSBs) with larger ones. This move aims to create 4 robust PSBs, potentially leaving SBI, PNB, BOI, and BOB as the remaining standalone entities.

Govt Plans to Merge Smaller PSBs Into Larger Giants

As per the news reports, the government is drafting proposals to merge Indian Overseas Bank, Bank of Maharashtra, Central Bank of India, and Bank of India with larger PSBs like State Bank of India, Punjab National Bank, and Bank of Baroda. 

If implemented, the number of PSBs in India could shrink drastically to just 4 major banks by FY 2026-27. The objective is to improve operational efficiency, reduce NPAs, and compete globally.

Private Sector Entry into PSB Management

In a parallel move, the government is opening public sector bank management roles to private industry professionals. This will start with the State Bank of India, where 1 of the 4 MD positions may soon be available to outside candidates. The aim is to bring fresh expertise and corporate management experience into the public banking space.

Read More: SBI Leads Public Sector Banks Which Together Record ₹49,456 Crore Profit in Q2 FY26!

Why Fewer Banks Could Mean Better Banking

The consolidation aims to optimise resources and strengthen digital banking infrastructure. Rising operational costs and a surge in non-performing assets have weakened smaller banks’ sustainability. Fewer but larger banks will allow better capital utilisation, quicker policy execution, and increased global competitiveness, aligning with the NITI Aayog’s recommendations to revamp the sector.

Conclusion

India’s banking sector is poised for another round of massive restructuring. With a focus on digital growth, managerial reforms, and international competence, the proposed merger aims to leave only 4 major PSBs by FY 2026-27, streamlined for better service and fiscal performance.

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