Will Six Mega Banks Replace India’s Twelve PSU Lenders Soon?

A government inquiry in the last week of October reopened discussions on the government plan to merge PSU banks. The early review suggested that the 12 PSU banks merger update may move to a structured framework in FY26.

Will the structure of public banks shrink again like it did in 2020? The cue came after a 6 November 2025 Reuters report placed the combined assets of the 12 lenders at ₹171 trillion. This number set off public debate because it showed the scale at which these banks operate.

Before any merger is confirmed, it helps to see how public banks are grouped by size and function. Public lenders serve different segments of the economy. This affects how they may fit into merger rounds.

Current Groups Of Public Sector Banks

Public Sector Banks can be viewed in functional groups based on their scale and operational focus, helping clarify their roles in credit delivery and government-led initiatives.

This system helps explain why some units may act as anchors while others may be paired to them.

A major trigger for fresh talks came with a 13th November 2025 Loansjagat article, which estimated that credit growth in public banks could reach 12 percent in FY26, compared to 10.1 percent in FY25. This estimate raised questions on whether stronger combined banks would support rising loan demand.

Before looking at possible anchor banks, it helps to remember that these are functional roles and not a confirmed merger list. Officials often study banks that already run national programmes or large networks. These banks may act as anchors because they can absorb smaller lenders.

Possible Anchor Banks And Their Primary Roles

Identifying potential anchor banks and their key responsibilities helps show how major PSBs are positioned to lead government programmes and sector-focused initiatives.

These roles show why some banks appear more often in public discussions.

The present debate links to a policy note placed on the government portal on 18 August 2025 under the Viksit Bharat 2047 vision. That note outlined an ambition to bring at least two public lenders into the global top tier by 2047. This goal added a long-term reason for the merger plan.

How Past Consolidation Cycles Show Government And Bank Behaviour

Public memory still holds the 2019 to 2020 merger cycle. During that phase, banks issued notices on their websites to assure depositors that service access and branches would stay unchanged. The Ministry of Finance followed a three-step process listed in 2020 documents.

1. Combine banks with similar digital systems.
2. Realign branches that covered the same area.
3. Strengthen digital channels before shift of accounts.

Banks handled the transition without major disruptions. These past steps guide expectations for the next cycle. The present situation may take more time because capital positions differ more widely than in 2020.

Conclusion

The 12 PSU banks merger update sits at the centre of one of the biggest banking stories this year. The asset figure of ₹171 trillion, shared in the 6 November 2025 Reuters report, highlighted the size of India’s public lenders. Any merger will need Cabinet approval and a formal notification on government portals. Until then, the structure of the public banking system remains open to change.
 

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