Public Sector Banking Merger in India : An Overview
1. Introduction
Public sector banks are government-owned banks where more than 50% share is held by the Ministry of Finance, Government of India or Ministry of Finance of various state governments. The main objective of these banks is social welfare. At present there are 12 public sector banks functioning in India after the bank merger. All the public sector banks delivered a significant amount of profit, reduces gross NPA, increases earnings per share but creates some hurdles on employment generation and customer satisfaction.
2. History of nationalization of banks and merger
The Government of India started its banking business with the nationalization of the Imperial Bank of India in 1955. Reserve Bank of India took 60% share of Imperial Bank of India and named State Bank of India which is the first public sector bank in India. However, the major reforms in the banking sector took place on 19 July 1969 when the Central Government nationalized 14 private commercial banks. Thereafter in April, 1980, the Central Government nationalized 6 private commercial banks. The last merger of public sector banks took place on 1st April 2020. The picture of recent merger is given below:
Table: 1 Merger of Banks
| S.N. | Merged into ( Anchor Banks) | Banks Merged | Merger Year |
| 1 | Bank of Baroda | Dena Bank, Vijaya Bank | 1st April, 2019 |
| 2 | Canara Bank | Syndicate Bank | 1st April, 2020 |
| 3 | Indian Bank | Allahabad Bank | 1st April, 2020 |
| 4 | Punjab National Bank | Oriental Bank of Commerce
United Bank of India |
1st April, 2020 |
| 5 | State Bank of India | State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala, State Bank of Travancore, Bharatiya Mahila Bank | 1st April, 2017 |
| 6 | Union Bank of India | Andhra Bank, Corporation Bank | 1st April, 2020 |
After merger at present there are 12 nationalized banks in India. We now present below the name of the banks with Government shareholding power:
Table: 2 Nationalised Banks and Their Government Shareholding Power
| S.N. | Name of Nationalized Bank | Government shareholding power (%) |
| 1 | State Bank of India | 55.5% |
| 2 | Canara Bank | 62.93% |
| 3 | Bank of Baroda | 63.97% |
| 4 | Punjab National Bank | 70.08% |
| 5 | Bank of India | 73.38% |
| 6 | Indian Bank | 73.84% |
| 7 | Union Bank of India | 74.76% |
| 8 | Bank of Maharashtra | 73.60% |
| 9 | UCO Bank | 90.95% |
| 10 | Central Bank of India | 89.27% |
| 11 | Indian Overseas Bank | 92.44% |
| 12 | Punjab and Sind Bank | 93.85% |
Source: Self-prepared (on the basis of data collected from annual reports 2024-25 of twelve public sector banks)
3. Objectives
i. Improved efficiency: The merger of banks aims to boost banking efficiency. It is expected to lead to better operational efficiency and cost reduction due to merger. Effective utilization of technology allows for better digital infrastructure and offers customers a wide range of products and services.
ii. Cost reduction: Mergers allows banks to scatter operational costs and to reduce administrative expenses. Enhancement of technology adoption decreases such type of cost in various ways.
iii. Good Governance: Location of bank branches are generally classified in four categories namely Metropolitan branch, Urban branch, Semi-urban branch and Rural branch. The aim of merger is to open each year a good number of banking outlets in Unbanked Rural Area (URB).
iv. Financial inclusion: As merged banks have a larger capital base so it enables to provide lending facility to various sectors of the economy including farmers and weaker sections of the society.
4. Net profit earned by public sector banks
Merger of Public sector banks enhances profitability. Profitability is needed to compete with private banks and international competitors. It is also needed to pay dividend to the central government, shareholders and for performing corporate social responsibility.
Table: 3 Net Profit Earned by Different Nationalized Banks
| SN | Name of Nationalised Bank | Net Profit (₹) as on 31.03. 2024 | Net
Profit (₹) as on 31.03.2025 |
Increase in % |
| 1 | State Bank of India | 61077 | 70901 | 16.08% |
| 2 | Canara Bank | 14554 | 17027 | 16.99% |
| 3 | Bank of Baroda | 17789 | 19581 | 10.07% |
| 4 | Punjab National Bank | 8245 | 16630 | 101.69% |
| 5 | Bank of India | 6318 | 9548 | 51.12% |
| 6 | Indian Bank | 8063 | 10918 | 35.41% |
| 7 | Union Bank of India | 13648 | 17987 | 31.79% |
| 8 | Bank of Maharashtra | 4055 | 5520 | 36.12% |
| 9 | UCO Bank | 1654 | 2445 | 47.82% |
| 10 | Central Bank of India | 2549 | 3785 | 48.49% |
| 11 | Indian Overseas Bank | 2656 | 3335 | 25.56% |
| 12 | Punjab and Sind Bank | 595 | 1016 | 70.75% |
Source: Self-prepared (on the basis of data collected from annual reports 2024-25 of twelve public sector banks)
Table:4 Gross NPA and EPS by Public Sector Banks
| Gross NPA(%) | EPS(₹) | ||||
| As on 31.03.2024 | As on 31.03.2025 | As on 31.03.2024 | As on 31.03.2025 | ||
| 1 | State Bank of India | 2.24% | 1.82% | 75.17 | 86.97 |
| 2 | Canara Bank | 4.23% | 2.94% | 16.84 | 19.34 |
| 3 | Bank of Baroda | 2.92% | 2.26% | 34.40 | 37.86 |
| 4 | Punjab National Bank | 5.73% | 3.95% | 07.49 | 14.77 |
| 5 | Bank of India | 4.98% | 3.27% | 14.40 | 21.00 |
| 6 | Indian Bank | 3.95% | 3.09% | 63.23 | 81.06 |
| 7 | Union Bank of India | 4.76% | 3.60% | 18.95 | 23.56 |
| 8 | Bank of Maharashtra | 1.88% | 1.74% | 5.78 | 7.48 |
| 9 | UCO Bank | 3.46% | 2.69% | 1.38 | 2.04 |
| 10 | Central Bank of India | 4.50% | 3.18% | 3.17 | 4.36 |
| 11 | Indian Overseas Bank | 3.10% | 2.14% | 1.40 | 1.76 |
| 12 | Punjab and Sind Bank | 5.43% | 3.38% | 1.50 | 1.43 |
Source: Self-prepared (on the basis of data collected from annual reports 2024-25 of twelve public sector banks)
During the financial year 2024-25, twelve public sector banks reduced their Gross NPA. It is a tremendous financial performance of different public sector banks. It clearly indicates that strategic execution and operational efficiency and efficient utilization of Bank’s assets.
6. Dark side of merger
Mergers in some cases solved the problem of week banks but created new challenges regarding customer service. Strong banks absorbed weak banks bad loans but ultimately it is consumed by general people. Due to merger more than 4000 branches closed their function. In the semi-urban and rural areas customers lost the location advantage. Large number of bank branches are beyond the rural areas. In case of Central Bank of India, among 4545 bank branches only 1616 branches are located in rural area. In case of Union Bank of India only 30% bank branches are located in rural areas. In case of UCO bank, among 3305 bank branches only 1132 branches are located in rural areas. So rural people have to travel long distance to avail bank service. In the banking sector public sector banks were the big recruiter. But due to merger they have reduced the staff strength. Several banks outsource ATM management, cash handling and customer care to third parties.
7. Conclusion
The merger of public sector banks has largely achieved its intended objectives. They have produced significant amount of net profit, increased earnings per share and reduced NPAs. They are now in better position to compete with private banks and foreign banks. They are in a good position to perform their corporate social responsibility. But there are several dark sides also. As bank mergers cut down new job creation and enhances distance to travel bank branch in rural areas so it is not welcomed for further bank merger. Recent media reports have suggested a possible “Merger 2.0” plan to reduce India’s 12 public sector banks to just 4 by the financial year 2027, but the Central Government has clarified that no such merger proposal is currently under active consideration.
Authored by:
Dr. Jaydeb Bera
Associate Professor
Department of Commerce
Pingla Thana Mahavidyalaya
