Bank of Baroda MD and CEO P.S. Jayakumar. Photo: Mint
Bank of Baroda MD and CEO P.S. Jayakumar. Photo: Mint

Merger of Bank of Baroda, Dena, Vijaya Bank set to take 4-6 months: BoB CEO

The government has proposed an amalgamation of Bank of Baroda, Dena Bank and Vijaya Bank to create India's third largest bank

New Delhi: The amalgamation of Bank of Baroda, Dena Bank and Vijaya Bank could take between 4-6 months, Bank of Baroda Managing Director and Chief Executive Officer P.S. Jayakumar said.

The government on Monday advised the boards of the three banks to consider a proposal for merger, creating India’s third largest bank with a total business of more than 14.82 trillion.

“I do not know how long it will take but if you go by past practices and experiences, it would take probably four to six months. It can be speeded up also," Jayakumar said after the announcement.

The alternative mechanism under Finance Minister Arun Jaitley has advised the boards of the three banks to consider the proposal, said financial services secretary Rajiv Kumar in a briefing, adding that it is the next logical step in further restructuring and strengthening the banking system.

The first big merger during the tenure of the current National Democratic Alliance government was the merger of the five associate banks of State Bank of India with itself. The government has also moved to offload its majority stake in IDBI Bank to Life Insurance Corporation of India.

Jaitley, in the briefing, said that the government has been careful in not merging weak banks. “We have borne in mind that we do not want a merger of what are, relatively weak banks. You can have two well-performing banks absorbing a third one in the amalgamation process and hopefully creating a mega bank. The lending ability of this bank will be far higher. This amalgamated entity will have the ability to expand its banking operations. No employee will face any adverse service conditions after the amalgamation."

Kumar said there was no need to amend the Bank Nationalization Act. The scheme of amalgamation will be tabled in Parliament, he added. “Dena Bank has a strong CASA (current account savings account) base and a strong MSME portfolio. Vijaya Bank has a strong credit culture and is one of the better performing banks. BOB is an aspirational bank with a strong global reach and is technologically sound."

The amalgamated entity would be a strong entity leveraging on all these strong points, he added.

The combined entity’s capital adequacy rating will be at 12.25%, with tier 1 capital at 9.32% and net NPAs at 5.71%. The combined entity will have nearly 9,500 branches.

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