Mumbai: Bank of Baroda (BoB), Dena Bank and Vijaya Bank have decided to set up internal committees, which will help integrate their functions before the merger happens, said a person familiar with the development. In a meeting on Wednesday, the bankers also decided to appoint three separate valuers to arrive at share swap ratios, the person said, adding that the valuer appointed by one bank will also evaluate the other two banks, before a common ratio is arrived at and sent to the government. This was the second meeting after the merger announcement.

The committees will comprise the chief executive officers (CEOs) and executive directors of the three banks. “We have decided to form a few internal committees to integrate functions in the three banks. They include committees on credit, human resources (HR) and information technology (IT)," the person said, requesting anonymity.

Mint had reported on 3 October that although the three banks use the Finacle core banking solution developed by Infosys Ltd, they have different versions of the software. While Dena Bank and Vijaya Bank are on Finacle 7.2, Bank of Baroda had recently upgraded to Finacle 10.2.

On 10 September, the government had proposed the merger of the three state-owned banks. The merged entity, comprising two relatively stronger banks and a weak one, will be the third-largest lender in India, after State Bank of India and HDFC Bank Ltd, with a total business of 14.82 trillion.

Following the merger announcement, the managements had assured the staff that the government has decided to retain the banks’ individual identities even after the bank merger.

Analysts were wary of the human resource complications. A research report by Kunal Shah of Edelweiss Securities said challenges on human resources, process integration, branch rationalization and management bandwidth, will pose integration risks. “Roadblocks, for example, due to agitation from employees cannot be ruled out."

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A Kotak Institutional Equities note said that the merged entity will have 2,205 branches in western India, while the south and north will have 846 and 713 branches, respectively.

This is the third major restructuring in the public sector banking space by the government. The first was the merger of the five associate banks of SBI with itself. The merger had resulted in a sharp jump in the combined entity’s bad loans portfolio, crimping its profit. The associate banks made a loss of 5,792 crore for the March quarter of 2016-17 and 10,243 crore for the entire year. This resulted in the consolidated net profit of SBI going down to a mere 241 crore, while the stand-alone net profit was 10,484 crore.

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