Centre merges Bank of Baroda, Vijaya Bank, Dena Bank

Three banks merger

This will create India's third largest bank after SBI and ICICI Bank, the government said, adding that the merged entity will have total business to the tune of '14.82 lakh crore. NDTV reported that Financial Services secretary Rajiv Kumar said before any further action, the approval of the proposal by the three banks is absolutely necessary.

"Consolidation of banks was in our agenda and the first step has been announced", Finance Minister Arun Jaitley told reporters here on Monday.

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

Moreover, all the three banks work on the same technological platform, which eases integration and the banks will also enjoy complementary geographies as Bank of Baroda has a stronghold in the western part of India while Vijaya Bank is strong in the south.

Now what?The respective boards of each bank will now vote on the merger and if approved, will commence preparations on a plan for the amalgamation of the three entities and decide on a share-swap ratio.

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.

Last year, five associate banks of SBI and Bharatiya Mahila Bank were merged with State Bank of India to catapult the country's largest lender to among the top 50 banks in the world. He said "no employee will face service condition adverse to his present condition" following the proposed merger of PSBs.

However, FM did not talk about the name of the new entity and said that it will be revealed later.

"Though the consolidation move itself is negative and ushers in uncertainty, the proposed merger of Dena with stronger Vijaya is relatively better for BoB". In contrast, Dena Bank - the weakest of the lot - made huge gains in early trade and was up nearly 20 per cent at Rs 19.05.

The government owns majority stakes in 21 lenders, which account for more than two-thirds of banking assets in Asia's third biggest economy. "Banks should be made strong and it will depend on process", he said. He said the real picture of the NPA issue was known only in 2015.

The Minister added that this indiscriminate lending of nature "as if there was no tomorrow" took a toll on the economy, which was followed by evergreening of loans and brushing the NPAs under the carpet.

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