Dena Bank, Vijaya Bank and Bank of Baroda to be merged

Bank Merger

In an attempt to push ahead banking reforms, the government has made a decision to merge Dena Bank, Vijaya Bank and Bank of Baroda making it the third largest bank of the country with a combined market cap of Rs 48,000 crore.

Rajiv Kumar, Department of Financial Services Secretary at the Ministry of Finance, Government of India, said that the decision was arrived to create India's 3rd largest globally competitive bank.

This is the third major restructuring in the public sector banking space undertaken by this government.

Also, many banks were in a fragile condition due to excessive lending and ballooning NPAs, he said. These three have been languishing with business restrictions under Reserve Bank of India's corrective prescriptions and without much scope for growth in lending.

The three-way merger has triggered hopes for more such prospects and the next bunch of candidates of week banks may be from the east - Allahabad Bank, Uco Bank and United Bank of India. He said "no employee will face service condition adverse to his present condition" following the proposed merger of PSBs.

He said the NPA curve was now taking a turn and the time was opportune to go ahead with consolidation of banks. "That took a toll on the economy".

Besides, Kumar said, Provision Coverage Ratio (PCR) would be better at 67.5 percent against average of 63.7 percent and cost to income ratio of the combined entity would come down to 48.94 percent as compared to average of 53.92 percent.

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Cheered by the news, Dena Bank hit an upper circuit limit of 20 per cent in the opening deals while Vijaya Bank was trading flat at Rs 60.20 apiece on BSE, up 0.67 per cent.

The government owns majority stakes in 21lenders, which account for more than two-thirds of banking assets in the Asia's third biggest economy. As a result, the share of bad loans as a percentage to total loans has been rising.

The grapevine was working overtime Tuesday, and Uco Bank was at the centre of the speculative talk.

Jaitley said the truth of the bad loan crisis was revealed only in 2015 because the previous UPA government had been sweeping the problem under the carpet.

The Finance Minister further added "In the first step of consolidation, we consolidated the subsidiaries of SBI with the parent bank to create a mega global bank".

Allahabad Bank reported Rs 4,674 crore net loss for FY18 with the ratio of gross non-performing assets being at 15.96%.

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