Bank of Baroda merger: The combination creates the third largest bank in the country in terms of assets
State-run Dena Bank and Vijaya Bank are a part of Bank of Baroda from today, marking the first-ever three-way merger in India’s banking sector. The amalgamation of Vijaya Bank and Dena Bank into Bank of Baroda, first announced in September last year, comes into force from April 1, 2019. The development creates the country’s third largest public sector bank, and comes into effect days after the Supreme Court dismissed petitions seeking a grant of stay on the mega merger.
Here are 10 things to know about the merger of the three state-run banks:
The merger comes as part of the government’s efforts to tackle lakhs of crores of bad loans plaguing the sector and revive credit growth.
Finance Minister Arun Jaitley has on several occasions stressed the need to have stronger consolidated banks, which could have economies of scale and operational efficiencies.
The government is reportedly studying various models of PSU bank consolidationthough a concrete decision will be taken only after the success of the Bank of Baroda (BoB) merger.
“The success of the Bank of Baroda merger will be looked at closely before deciding on a future course,” news agency IANS quoted a source as saying last week.
The government owns majority stakes in 21 banks that account for more than two-thirds of the banking assets in the country.
According to the scheme of amalgamation, the businesses of Vijaya Bank and Dena Bank are transferred to Bank of Baroda. The permanent and regular officials of Vijaya Bank and Dena Bank are now transferred to the merged entity.
The three-way merger – creating the third largest PSU bank after SBI and PNB – creates a combined business of Rs. 14,82,422 crore (taking into account business worth Rs. 1,72,937 crore and Rs. 2,79,674 crore of Dena Bank and Vijaya Bank respectively).
The amalgamation comes into force two years after five associate banks and Bharatiya Mahila Bank became a part of State Bank of India (SBI).
For the quarter ended December 31, Bank of Baroda reported a more than four times increase in net profit, though it still failed to meet Street estimates due to higher provisions for bad loans.
Bank of Baroda shares have declined 4.7 per cent down since announcement of the merger in September.