Dena Bank, Vijaya Bank, BoB to merge

Dena Vijaya BoB to merge and form country’s 3rd largest bank

Dena Vijaya BoB to merge and form country’s 3rd largest bank

Addressing reporters in New Delhi on Monday, Rajiv Kumar said the government has made a decision to merge Dena Bank, Vijaya Bank and Bank of Baroda (BoB) and the merger of the three banks will make this the third largest bank of the country.

FM Arun Jaitley says merger will not only strengthen the banks, but also increase their lending ability.

Notably, this would be the second big merger in the banking sector after the merger of SBI associate banks with the SBI.

A senior banker said that with the amalgamation announcement, the government may be moving a step closer to implementing the Narasimham Committee recommendation on structural reforms.

Rajeev Kumar, financial services secretary, said the merger plan was part of the effort to clean up the country's banking system. Jaitley said that no employee on the combined entity will face any service conditions which are adverse in nature. While it may make sense to amalgamate Vijaya Bank and Bank of Baroda as both banks have relatively strong financials, including Dena Bank in the consolidation exercise is fraught with pitfalls, he added. This step will particularly help Dena Bank, the weakest of the three, which is now under the Reserve Bank of India's Prompt Corrective Action (PCA) framework and has been barred from extending fresh loans.

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The amalgamated bank would be the third largest bank in India and will be strong competitive lender with economies of scale, he said adding the three would have synergies for network, low-priced deposits and subsidiaries.

Arun Jaitley further added, "Restructuring and evergreening of loans led to a rise in NPAs".

"Prior to 2008, loans worth Rs 18 lakh crore were given. That took a toll on the economy".

Jaitley said the government took a series of steps to tackle the NPA challenge including the Insolvency and Bankruptcy Code "which was a defining moment in creditor-debtor relationship".

The merged bank will have combined deposits of Rs 8.41 lakh crore, gross advances of Rs 6.4 lakh crore, 9,489 branches and 85,675 employees. "The consolidation will help in creating a strong globally competitive bank with economies of scale", said a finance ministry official. The best of the service conditions will apply to all of them, he said. Vijaya Bank and Dena Bank, which are expected to gain from the merger, rose 1.25 per cent and 19.75 per cent respectively.

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