Behind the scenes, preparations appear to be gathering pace as two major public sector lenders move closer to a possible consolidation.
The early stages of the merger process between Union Bank of India and Bank of India (BoI) are underway, according to sources familiar with the development. Both banks are said to be carrying out due diligence, including detailed internal reviews of operations and integration plans. Some officials indicated that the merger could be completed by the end of the current calendar year.
“The government is keen to merge smaller banks with larger ones to create 4 to 5 big PSU banks instead of the current 12,” said a senior banking official, speaking on condition of anonymity.
Once finalised, the merger is expected to create one of India’s largest public sector lenders, with a much bigger balance sheet, wider branch network, and an expanded customer base. The combined entity would emerge as the second-largest PSU bank in the country, with estimated assets of around ₹25.4 lakh crore in FY25. It would also become the third-largest bank overall, after State Bank of India and HDFC Bank.
In terms of market capitalisation, the merged bank would rank sixth at nearly ₹2.13 lakh crore at current prices. This would place it ahead of Bank of Baroda, Canara Bank, and Punjab National Bank. At present, Union Bank of India and Bank of India are the fifth- and sixth-largest PSU banks, respectively.
A key hurdle in the merger process is expected to be the integration of technology platforms. The two banks operate on different core banking systems and digital architectures, making alignment a complex task. Queries sent to both banks on integration plans had not received a response at the time of publication.
Both lenders have shown steady improvement in recent quarters, supported by lower non-performing assets, recoveries from stressed accounts, and stronger capital buffers. Improved asset quality and profitability could help ease the transition once the merger is executed.
The proposed merger forms part of the government’s broader plan to consolidate public sector banks, with the aim of creating fewer, larger, and more competitive institutions within India’s banking system.
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