This study focused on issues and challenges of PSU banks in India. The objective of the researcher is going to find the suitable suggestions for this research area. Currently this topic is most needed for our country. This research work contains secondary data for achieving the aim of the researcher. The needed information collected from RBI published reports, magazines and research articles. Our country has 97621 banks with branches. So, difficult to maintain the banks’ ethics and culture. Granting the loan and collecting the debt from the customers is the main task for our banks. They also promote the acceptance of bills and discounting bills from inside and outside of India. This is also creating more financial risk. Some people are not paying the due amount at the correct time and they are trying to cheat the bank officials. In this situation, the Non-Performing Assets (NPA) was created because of bad debts. The bank officials are reached bad situation for handling the banking activities. At that time the expert committee suggests merging one bank with another one to save the life of the banks. A merger is a combination of two or more organizations or banks to pool the capital after a merger occurs. The study period taken for this work were 2018 to 2020. In this period our Indian economy faced more challenges for developing the business sectors because of Covid 19. So, the researcher interest to know the reason for the merger of the banks, the problems behind the merging and the challenges for merging the PSU banks in India