new delhi, Oct. 29 -- The government is drawing up a fresh blueprint to merge select public sector banks, said three people aware of the matter, as it aims to scale up such lenders and streamline overlapping operations under banking sector reforms planned over the next few years. The discussions at the finance ministry are around a merger of Union Bank of India and Bank of India, both headquartered in Mumbai, said the first person mentioned above. If the merger goes through, it will create a state-run lender ranked second only after the country's top bank by assets, State Bank of India. The second largest public sector bank today is Bank of Baroda with total assets of Rs.18.62 lakh crore as of 30 June 2025. This asset base ranks it fourth among all banks, private ones included, behind HDFC Bank and ICICI Bank. A merged Union Bank of India and Bank of India would have assets of Rs.25.67 lakh crore, rubbing shoulders with ICICI Bank (Rs.26.42 lakh crore). The ministry is also weighing the option to merge Indian Overseas Bank and Indian Bank, both Chennai-based lenders with a significant presence in Tamil Nadu and neighbouring states, the first person mentioned above said. All three people quoted earlier preferred to stay anonymous. As part of the plan, Punjab & Sind Bank and Bank of Maharashtra, lenders that are ranked lower by assets among public sector lenders, are being considered as potential candidates for privatization in later phases. Spokespersons for Union Bank of India, Bank of India, Indian Overseas Bank, Indian Bank, Punjab & Sind Bank, Bank of Maharashtra, Reserve Bank of India (RBI), and the ministry of finance didn't respond to queries emailed on 21 October. The discussions are part of a decades-long process of banking reforms in India that were set rolling in 1991. The latest milestone in the chronology of such reforms was the amalgamation of associate banks into SBI in 2017, when it was signalled that the mega-merger would be followed by more such deals. "Contrary to perceptions that the [earlier] plan had been shelved, the finance ministry is working on a fresh blueprint on bank consolidation. The aim is to strengthen public sector banks through scale and efficiency, not just size. So, parameters such as optimisation of operations and synergies are being stressed in any consolidation exercise," the second person said. A third person confirmed the discussions and the names of the banks specifically being considered for mergers and those for privatization. Other government-controlled banks may be considered for amalgamation, the third person said. Timelines have not been finalized but the process most likely would follow in FY27. Internal teams in the department of financial services of the ministry of finance have been tasked to conduct due diligence and prepare cost-benefit analysis for each scenario in the consolidation exercise. An external agency may be roped in once the banks under the exercise are finalized, according to the third person.....