PSU Banks Merger: SBI Chief Says Another Round 'Not A Bad Idea' As Govt Weighs Big Push

CS Setty, the chairman of the State Bank of India (SBI), has backed the Centre’s plan to merge several public sector banks to the big ones in order to boost the next level of growth and scale in India’s

financial space. In an interview to Bloomberg, Setty said that there’s a requirement of some further rationalization, as there are still some smaller, sub-scale banks.

“If another round happens, it may not be a bad idea,” SBI chairman added in the Bloomberg interview.

The Indian government is mulling another consolidation plan in public banking sector by merging several small lenders, including Indian Overseas Bank (IOB), Central Bank of India (CBI), Bank of India (BOI) and Bank of Maharashtra (BOM) with large public lenders under mega merger, as earlier reported by Moneycontrol.

The report added that this mega merger plan is necessary for supporting the next phase of credit expansion and financial sector reforms.

These smaller lenders could be merged with big banks such as Punjab National Bank (PNB), Bank of Baroda (BoB) and State Bank of India (SBI), the MC report added.

The proposal of mega merger is set to be taken up first at the Cabinet level by officials and then will be examined by the PMO.

The renewed merger push comes even as it diverges from NITI Aayog’s earlier suggestion to privatise or restructure smaller public sector banks (PSBs) such as Indian Overseas Bank (IOB) and Central Bank of India (CBI), which were identified as potential candidates for strategic sale.

NITI Aayog had recommended that only a few large state-run lenders — SBI, PNB, BoB, and Canara Bank — be retained under government control, while the remaining PSBs should either be merged, privatised, or have their government stake reduced.