New Delhi: The Union government has decided to merge three state-owned banks — Vijaya Bank, Dena Bank and Bank of Baroda. This move will create India’s third-largest lender.
Financial services secretary Rajeev Kumar made the announcement at a news conference along with Finance Minister Arun Jaitley. He said the boards of the three banks will examine amalgamation proposal.
The decision taken by 'Alternative Mechanism' to amalgamate three banks would create a mega lender which will be stronger and sustainable.
According to PTI, the envisaged amalgamation will be the first-ever three-way consolidation of banks in India, with a combined business of Rs 14.82 lakh crore, making it the third largest bank after SBI and ICICI Bank.
Jaitley said the government had announced in the Budget that consolidation of banks was in the agenda and the first step has been announced. With this major announcement, the number of PSU banks in India would come down to 19.
"The consolidation will help create a strong globally competitive bank with economies of scale and enable realisation of wide-ranging synergies," Jaitley said.
Announcing the merger, Jaitley assured employees of the three banks, saying, “No employee will face any service conditions which are adverse in nature. The best of the service conditions will apply to all of them."
Kumar said the banking sector needs reforms and the government is taking care of banks' capital needs. Rationalisation of overseas operation in banking sector is in full swing, he said, adding the government is keen to take steps so that history isn't repeated as far as NPAs are concerned.
The merged entity will have better financial strength, Rajiv Kumar said, adding that its net NPA ratio will be at 5.71 per cent, significantly better than public sector bank (PSB) average (12.13 per cent).
Kumar further said the respective board would take approval in next 10-15 days and the entire merger process would be complete by the end of the current fiscal.
The move follows top lender State Bank of India last year merging with itself five of its subsidiary banks and taking over Bharatiya Mahila Bank, a niche state-run lender for women.
The government owns majority stakes in 21 lenders, which account for more than two-thirds of banking assets in the Asia's third biggest economy.
But these PSU banks also account for the lion's share of bad loans or NPAs plaguing the sector and need crores of rupees in new capital in the next two years to meet global Basel III capital norms.
(With PTI inputs)
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