You might be wondering why banks merge? This is a question that often arises in the minds of bank customers and they are unable to understand it.
The recent bank mergers have transformed India’s financial sector and this change is likely to continue till 2025. When banks merge, customers get a strong financial partner and with the merger, new products and services are developed for customers.
In this blog we will look at the major bank mergers that have happened or are going to happen during 2025, their impact and what customers should expect from them.
When did the first bank merger in India occur?
Merger of banks is not a new thing in India. Do you know when the first bank merger happened in India. The first bank merger in India happened in 1921 with the formation of Imperial Bank of India.
Bank of Bengal, Bank of Bombay and Bank of Madras were called Presidency Banks and were merged to form Imperial Bank of India. Later, Imperial Bank of India was nationalized in 1955 and it became State Bank of India (SBI).
Why Do Bank Mergers Happen?
The key hope for banks merging is to financially strengthen banks, increase efficiency, and provide customers with better products and services. When banks merge, they bring financial strengths together and drive positive authority in the market. Merging can also help banks reduce costs and provide more options and better services for customers.
Major Bank Mergers in India by 2025
Let’s take a look at some of the most significant bank mergers in India by 2025:
- Punjab National Bank (PNB), Oriental Bank of Commerce (OBC), and United Bank of India
- Canara Bank and Syndicate Bank
- Indian Bank and Allahabad Bank
- Vijaya Bank and Dena Bank
- Lakshmi Vilas Bank and DBS Bank India Ltd.
- IDBI Bank and LIC (Life Insurance Corporation of India)
- State Bank of India (SBI) and Its Associate Banks
1. Punjab National Bank (PNB), Oriental Bank of Commerce (OBC), and United Bank of India
Punjab National Bank merged with United Bank of India and Oriental Bank of Commerce in 2020, making the bank even stronger and becoming one of the largest public sector banks in India and providing a wide range of banking services. This merger resulted in PNB becoming the second largest public sector bank in India after State Bank of India (SBI).
2. Canara Bank and Syndicate Bank
In the year 2020, there was a merger of Syndicate Bank with Canara Bank which tremendously increased Canara Bank’s customer base and positioning in the market. Canara Bank is one of India’s largest and most powerful banks.
3. Indian Bank and Allahabad Bank
In 2020, Indian Bank and Allahabad Bank merged into a single entity. This merger improved Indian Bank’s financial strength and capacity to grow its business, positioning it as a stronger competitor in the Indian banking market.
4. Vijaya Bank and Dena Bank
In 2019, Vijaya Bank and Dena Bank merged with Bank of Baroda and this merger allowed Bank of Baroda to expand its footprint both domestically and internationally and enable the customers to access many more banking options with improved customer experience.
5. Lakshmi Vilas Bank and DBS Bank India Ltd.
Lakshmi Vilas Bank was merged with DBS Bank India Ltd. on 27 November 2020 after receiving permission by the Reserve Bank of India (RBI) and the Government of India upon reviewing the bank’s positioned financial standing.
6. IDBI Bank and LIC
In 2019, LIC bought IDBI Bank. This merger enabled LIC to build a good banking division in order to supply a wider list of financial products and services to clients.
7. State Bank of India (SBI) and Its Associate Banks
In 2017, the State Bank of India merged with its five associate banks- State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala, and State Bank of Travancore.. This merger in 2017 made the SBI the largest public sector bank in India with a huge customer base- and many different services.
Benefits of Bank Mergers
Bank mergers have a number of benefits for the banks and customers involved. Here are some of the benefits:
- 1.More Capital and Resources: When two banks merge, they have more capital and resources. This makes banks stronger and able to weather fluctuations in the market.
- 2.Better Customer Experience: Banks can implement changes to services through merger, leading to better, newer, and more desirable products for customers.
- 3.Lower Operating Costs: After a merger, banks can consolidate operations to reduce duplication, cut costs, and improve efficiency and overall service.
- 4.Access to Markets: Banks after a merger can reach into new geographic regions and markets, increasing their customers and services.
- 5.More Products and Services: Banks after a merger can offer new products and services due to the increase in resources to meet the needs of a wider range of customer preferences.
Which Banks Could Merge in the Future?
It is expected that the trend of bank mergers is expected to continue for the foreseeable future. The Reserve Bank of India (RBI) and the government have set out a strategy framed around consolidating public sector banks to improve their balance sheets. These mergers will allow banks to create greater products and services and further improve the customer experience.
It is also possible that there may be mergers amongst some private sector banks and regional banks, further increasing the competition in the banking sector and providing customers with more options.
Conclusion,
Bank mergers are taking up more and more space in India’s financial system. Banks are merging together to gain strength, serve more customers and maximize profits. Recently, some big banks have merged, which has impacted the Indian banking system introducing big changes. It will support in further growth and bring market innovations. But this is not the end – more banks will keep merging, as it will be beneficial for the customers, supporting their better services and provide them more financial product choices in the segment.
If you want to know more information regarding bank mergers, do check our blog. We update regularly with the latest information from the banking space.