Govt mulls Union Bank-Bank of India merger to form India's second largest PSU lender: Report

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26 Aug, 2025 12:21

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The Indian government is chalking out a plan to merge Mumbai-headquartered PSU lenders Union Bank of India and Bank of India as part of its latest banking reforms, Mint reported citing people familiar with the matter. If successful, the merger will create the country's second largest state-run bank, after State Bank of India (SBI), the report added.

This comes as the government aims to scale up the lenders and streamline overlapping operations in the banking sector over the next few years, the report further said.

Currently, the second largest public sector bank is Bank of Baroda, with total assets of Rs 18.62 trillion as of June 30. Among all the banks, it ranks fourth after SBI, HDFC Bank and ICICI Bank. A merged Union Bank of India and Bank of India entity will have cumulative assets worth Rs 25.67 trillion, coming close to ICICI Bank whose asset base stands at Rs 26.42 trillion, the report added.

The Finance Ministry is also considering options to merge Chennai-based lenders Indian Overseas Bank and Indian Bank, Mint further said, citing sources. Punjab & Sind Bank (PSB) and Bank of Maharashtra, which have lower assets in comparison to the other major PSU lenders, are being considered for privatization for a later period of time, the report added.

Moneycontrol couldn’t independently verify the report.

Earlier on October 15, Moneycontrol exclusively reported that the India’s banking sector is headed for another round of public sector bank consolidation with the government working on a mega merger that could see smaller lenders being merged with larger banks.

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.

Indian Overseas Bank (IOB), Central Bank of India, Bank of India (BOI) and Bank of Maharashtra (BOM) could be merged with big banks such as Punjab National Bank (PNB), Bank of Baroda (BoB) and State Bank of India (SBI), government sources added.

Between 2017 and 2020, the government merged 10 PSBs into four larger entities, bringing the count of state-owned banks to 12 from 27 in 2017.

During the period, Oriental Bank of Commerce and United Bank of India merged with PNB, while Syndicate Bank was merged with Canara Bank. The consolidation was aimed at creating stronger, better-capitalised banks capable of competing globally.