Setting the ball rolling on the merger of three public sector banks, Dena Bank’s board of directors, on Monday, recommended the bank’s amalgamation with Bank of Baroda and Vijaya Bank.
The merger, which is in line with the Finance Ministry’s proposal, will create India’s third-largest bank and the second-largest public sector bank with a total business (deposits plus advances) of ₹14,82,422 crore as on June-end 2018.
The merger move comes in the wake of the government’s Alternative Mechanism, after consultation with the Reserve Bank of India, recommending the amalgamation of Bank of Baroda, Vijaya Bank and Dena Bank. The rationale for the amalgamation cited by Dena Bank, in its stock exchange notification, is that “to be more efficient in the changing environment, the banks in the public sector space need to be bigger to meet the credit needs of a growing economy, absorb shocks and have the capacity to raise resources without depending unduly on the exchequer”.
Consolidation would enable creation of a bank with a business scale comparable to global banks, and capable of competing effectively in India and globally, the bank added.
The bank elaborated: “Amalgamation of our bank with Bank of Baroda and Vijaya Bank would result in a strong amalgamated bank, equipped with financial cushion to deal with post-amalgamation requirements during the stabilisation phase.”
In addition, the bank said consolidation would also provide impetus for building banks with scale, ramping up credit growth, adoption of best practices across amalgamating entities for cost efficiency, and improved risk management and financial inclusion through wider reach.
On September 18, Bank of Baroda said a meeting of its board of directors to consider the amalgamation will be convened by the bank shortly. On the same day, Vijaya Bank said its board of directors will meet at the earliest to consider the proposal for amalgamation.