Centre government merges Bank of Baroda, Vijaya Bank and Dena Bank

Arun Jaitley

The central government on Monday said the state-owned Bank of Baroda, Vijaya Bank and Dena Bank would be merged to create the country's third largest lender, as part of efforts to revive credit and economic growth.

The move follows top lender State Bank of India (SBI) last year merging with itself five of its subsidiary banks and taking over Bharatiya Mahila Bank, a niche state-run lender for women. Announcing the plan, Finance Minister Arun Jaitley said the merger would make the banks stronger and sustainable as well as increase their lending ability. Giving the context of the merger, he said bank lending was becoming weak, hurting corporate sector investments. Also, many banks were in a fragile condition due to excessive lending and ballooning NPAs, he said. "This amalgamated entity will increase banking operations," he said.

As was in case of SBI, no employee of the three banks would have service conditions that are adverse to their present one. 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. Financial Services Secretary Rajiv Kumar said bank boards of the three banks would examine the amalgamation proposal.

April 1, 2017 Day five associate banks and the Bharatiya Mahila Bank became part of State Bank of India
Rs 55 lakh cr Lending that took place between 2008 and 2014
Rs 8.5 lakh cr Total NPAs according to RBI's asset review in 2015

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