PSU Bank Merger Fact Check: Are SBI, PNB, Baroda Bank Acquiring Indian Bank, BOM, BOI, PSB, More?

Fake news has been circulating online that claims that the three largest PSU lenders, like State Bank of India, Punjab National Bank, and Bank of Baroda, are acquiring the smaller PSU banks as part of the mergers and fewer banks' campaign. However, the government has shunned the news and called it "fake."

Fact Check: PSU Bank Merger

In its fact check, PIB which is the government-backed news portal, said, "Fake document circulating regarding amalgamation of public sector banks."

Under the fake document, which is shown as the Gazette of India by Ministry of Finance, claims that the government has formed a new amalgamation scheme and structure.

The fake document claims that smaller PSU banks like Indian Bank, Bank of Maharashtra and Central Bank of India will be merged with State Bank of India. It claims that these three banks will become part of SBI Group.

Meanwhile, the document also claims that PNB will acquire Union Bank of India, Bank of India and Punjab & Sind Bank. While Bank of Baroda will acquire Canara Bank, Indian Overseas Bank and UCO Bank.

The fake document claims that the entire undertaking of the merging entities, such as rights, powers, claims, privileges, employees, customer accounts, contracts, bonds, banking agreements, and others, will become part of acquiring entities.

Calling the claims and the Gazette as FAKE, PIB said, "A document circulating on social media, purportedly issued by the Ministry of Finance, claims that the Central Government has notified a scheme for the amalgamation of Public Sector Banks."

Fact Check: Firstly, PIB stated that the document is fake and is not issued by the Finance Ministry.

It guided citizens to always verify claims and documents. It said, "Always verify such information through official and credible sources before believing or sharing it."

PSU Bank Mergers

It needs to be noted that PSU bank mergers and amalgamations have been part of the government's plan for more than a decade now. The goal is to have fewer but stronger PSU banks to compete in the global financial market. In more than three decades, the Indian financial system has seen significant transformation, and the merger of two or multiple banks to form one uniform and strong bank is part of this paradigm shift.

Here are some of the important banks merger since 1993:

1. April 2017

SBI + State Bank of Bikaner And Jaipur + State Bank of Hyderabad + State Bank of Patiala + State Bank of Mysore + State Bank of Travancore + Bharatiya Mahila Bank

In April 2017, SBI merged six of its associate banks, becoming the largest PSU bank in the country. SBI was the first experiment when the banks consolidation idea was sparked in 2017. The idea of having fewer but stronger PSU banks was first introduced by former Finance Minister Arun Jaitley.

2. April 2019

Bank of Baroda + Vijaya Bank + DENA Bank

Baroda Bank added the two banks under its ambit, which led the bank to become third largest PSU bank in India.

3. April 2020

Punjab National Bank + Oriental Bank of Commerce + United Bank of India

By merging Oriental Bank of Commerce and United Bank of India, PNB became the second-largest PSU bank in terms of branch network.

4. April 2020:

Canara Bank + Syndicate Bank

This Bengaluru-based bank is now the fourth largest public sector bank in India after it merged Syndicate Bank.

5. April 2020:

Union Bank of India + Andhra Bank + Corporation Bank

Union Bank became the fifth largest PSU lender in India after merging with Andhra and Corporation Banks.

6. April 2020

Indian Bank + Allahabad Bank

Because of merging Allahabad Bank in its network, Indian Bank is now the seventh largest PSU bank of the country.

Which Banks Are Not Merged?

There are six banks that are currently in the PSU banking system as single entities. These are

- Bank of India

- Indian Overseas Bank

- Central Bank of India

- Bank of Maharashtra

- UCO Bank

- Punjab & Sind Bank

The next merger among PSU banks involves the fate of the unmerged ones. However, when the next big PSU bank merger will happen is yet to be known.

Earlier this year, the PL Capital cited various media reports that said the government is likely drawing up a roadmap for the next round of PSU bank consolidation, with a formal announcement expected in April-May. Unlike previous one-time merger packages, the new strategy is expected to be executed in two to three tranches, enabling smoother integration and better capital alignment.

The April-May deadline has already passed, and hence there is a need for clarity on when the next merger in PSU Banks. In June it was known that the government will likely draw up a mega PSB merger plan to trim the number of state-owned banks number to 4 in the financial year 2026-27. Hence, new updates will be keenly watched.