First of all we Indians are emotionally attached with all the things in our life. Indians won't change their brands easily. whether it is tooth paste or newspaper or their banks they stick to their brands only.
Every financial institutions handle their mode of operations , compliance and banking regulations differently. When mismatched banks in culture, risk tackling and operation merge together, it will not be a profitable venture.
Bank mergers and acquisitions are complex procedures with the possibility of larger than life payoff and extraordinary risk.
The merger of a bank will definitely affect its customers. In a timeless life, customer has to learn the latest and irritating change in technology and new financial products if their bank merges with another bank.
Some banks are popular in one states and others are doing well in other parts of our country. And working culture is also differs from bank to bank. So it is not easy for the employees to cope with the merger.
It is easy to manage a small scale bank than the larger one. In a small scale bank the loss will be less and the bank can easily make over the loss into profit if it pay more attention.
Mergers are a challenge and have to be carefully designed. Mergers of bank cannot be broadly adopted because they lead to job cuts, branch closures and, lowering of quality and quantity of services.
So it is not a wise decision to merge all nationalised banks, as some are profit making banks. Government will not merge all the banks at least for now.