SBI, other PSU banks rise amid latest merger buzz: What you need to know

The Nifty PSU Bank index was trading 1.53% higher at 8,528.60 levels. All 12 constituents were trading in the green.

A Bloomberg News report on November 14 said that SBI Chairman Challa Sreenivasulu Setty has said that “Some further rationalisation might make sense. There are still some smaller, sub-scale banks,” Setty said, in an interview with Bloomberg News in Mumbai.

“If another round happens, it may not be a bad idea,” a Bloomberg News report said.

India, the report said, is discussing options to create large state lenders, which aligns with the government’s need to fund massive infrastructure and industrial projects in Asia’s third-largest economy. Prime Minister Narendra Modi has set a target to transform India into a developed economy by 2047.

That vision requires bank financing to increase to about 130% of gross domestic product from 56% currently, supporting an expected ten-fold increase in GDP to roughly $30 trillion, the report said.

Meanwhile, a separate news report by Informist Media on November 15 states that the finance ministry is working on a roadmap for the next round of mergers of public sector banks, and an announcement is likely in Apr-May.

While the plan is yet to be finalised, the mergers will be done in 2-3 tranches and not in one go, Informist reported, quoting the finance ministry official.

"Currently, there are 12 PSU banks. The agenda is to have a maximum of 6-7 nationalised banks, but bigger in scale than in the current form," the official said. "The government may merge 1-2 smaller banks first and then merge them with SBI or PNB, or may directly merge them with SBI or PNB," the official added.

The report further said that the government will analyse banks' performance for two more quarters before taking a final call on the banks that will be merged.

PSU Banks' Q2 FY26 Performance

State Bank of India-led public sector banks posted a record cumulative profit of ₹49,456 crore in the second quarter of the current fiscal year (Q2 FY26), reflecting a 9% year-on-year (YoY) growth despite two lenders reporting a decline.

All 12 public sector banks (PSBs) together made a profit of ₹45,547 crore in the September quarter of FY25. Thus, the increase in profit in absolute terms was ₹3,909 crore as compared to the same quarter of the previous financial year.

Market leader SBI alone contributed 40% to the total earnings of ₹49,456 crore, as per the published numbers on stock exchanges.

SBI logged a net profit of ₹20,160 crore in Q2 FY26, 10% higher than the same period of the previous fiscal.

When was the last PSU bank merger done?

Soon after beginning its second term, the Narendra Modi-led government unveiled a large consolidation plan involving 10 PSU banks.

Effective April 1, 2020, Oriental Bank of Commerce and United Bank of India were merged with PNB; Andhra Bank and Corporation Bank joined Union Bank of India; Syndicate Bank was integrated with Canara Bank; and Allahabad Bank was merged with Indian Bank.

As a result, the number of public sector banks was reduced from 20 to 12.

SBI: Latest news

State Bank of India, alongside its subsidiary SBI Payments Services, expects to complete the modernisation of its core-banking infrastructure in the next two years, a senior bank official has said.

Speaking at the Singapore FinTech Festival last week, SBI Managing Director (corporate banking & subsidiaries) Ashwini Kumar Tewari outlined the bank's roadmap to transform its legacy systems through hollowisation, microservices, modernisation, and externalisation, while maintaining the continuity, trust, and resilience that define its operations.