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The Indian government is reportedly preparing another major consolidation push in the public banking sector, with plans to merge smaller lenders such as Indian Overseas Bank (IOB), Central Bank of India (CBI), Bank of India (BOI) and Bank of Maharashtra (BOM) into larger state-run banks.
Under the proposed scheme, these smaller PSBs may be merged with anchor banks like Punjab National Bank (PNB), Bank of Baroda (BoB) and State Bank of India (SBI). The roadmap for this merger is expected to be first evaluated at the Cabinet level and then forwarded to the Prime Minister's Office for approval.
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.
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.
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