Punjab National Bank (BSE:532461) (PNB) is looking to merge with two or three government owned banks that could include Oriental Bank of Commerce (BSE:500315), Andhra Bank (BSE:532418) and Allahabad Bank (BSE:532480), two sources familiar with the situation told Reuters, as New Delhi tries to cut the number of state-owned lenders. The proposal to merge PNB with 2-3 other banks would be put before the cabinet for its nod, according to a government source. PNB could start the process of taking control of the banks in the next three months, according to the sources, who declined to be named, as they are not authorised to speak to the media.

PNB declined to comment, while the other banks did not immediately reply to an email from Reuters seeking further information. India's finance ministry also declined to comment on the story.