BoB, Vijaya Bank approve merger proposal to create second largest PSU lender

After the merger of Bank of Baroda, Vijaya Bank and Dena Bank, the number of public sector banks will come down to 19. Photo: Pradeep Gaur/Mint

New Delhi: The boards of state-run Bank of Baroda (BoB) and Vijaya Bank on Saturday gave in-principle approvals for their amalgamation with another lender Dena Bank, a move that would create the second-largest entity in the PSU banking space.

Earlier this month, the government announced the merger of Bank of Baroda, Vijaya Bank and Dena Bank to create the country’s second-largest public sector bank by assets and branches.

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The board of directors of the bank decided to give ‘in-principle approval’ for amalgamation of Vijaya Bank and Dena Bank with Bank of Baroda and commence the process for the same, subject to applicable approvals, Bank of Baroda said in a regulatory filing. Similarly, Vijaya Bank’s board gave its in-principle approval for amalgamation in line with the finance ministry’s proposal of 17 September.

“Amalgamation would enable creation of a bank with business scale comparable to global banks and capable of competing effectively in India and globally,” it said. Greater scale and synergy would lead to cost-benefit, higher productivity and efficiency of the banking system as a whole, it added.

Post-merger, the asset size of the new entity would be over Rs 14.5 lakh crore. The combined business of the amalgamated entities would make it the country’s second-largest public sector bank.

While announcing the merger, Financial Services Secretary Rajiv Kumar had said the merged entity would have better financial strength.

Dena Bank’s net NPA ratio will be at 5.71%, significantly better than public sector banks’ average of 12.13%, Kumar had said, adding, the provision coverage ratio would be at 67.5% against the average 63.7%. The cost to income ratio of the combined entity would come down to 48.94%, compared with the average 53.92%.

The amalgamation of the three banks would be through share swap, which will be a part of the scheme of merger.

In April 2017, State Bank had merged with itself five of its subsidiary banks and took over Bharatiya Mahila Bank, catapulting it among the top 50 global lenders with over $550 billion in combined assets.

After the merger of BoB, Vijaya Bank and Dena Bank, the number of public sector banks will come down to 19.

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