Merger of Vijaya Bank, Dena Bank & Bank of Baroda announced

Arun Jaitley

Dena Bank, Vijaya Bank and Bank of Baroda to be merged to form India's third largest bank

Speaking on the decision, Finance Minister Arun Jaitley said the government had announced in the budget that consolidation of banks was also in its agenda and the first step has been announced.

Bengaluru-based Vijaya Bank's Managing Director and Chief Executive Officer R A Sankara Narayanan said these three banks were the best possible combination for an amalgamation.

India introduced a new insolvency process in 2016 to speed up debt recoveries and restructurings, and in February 2017 approved the merger of State Bank of India (SBI) with its five subsidiary banks, helping the country's largest lender by assets cut expenses.

He added that the government would now await the response of the banks to the proposal.

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DFS secretary Rajiv Kumar said there is no need to amend the Bank Nationalization Act. The merged entity will have a combined business of Rs 14.82 lakh crore, with 10,000 branches and around 85,000 employees. This step will particularly help Dena Bank, the weakest of the three, which is now under the Reserve Bank of India's Prompt Corrective Action (PCA) framework and has been barred from extending fresh loans.

The idea of amalgamation was proposed by a Cabinet-approved Alternative Mechanism on bank mergers comprising Jaitley, Railways Minister Piyush Goyal and Defence Minister Nirmala Sitharaman after a meeting Monday. Rationalisation of overseas operation in banking sector is in full swing. Rajiv Kumar, Department of Financial Services Secretary, announced that the decision was arrived at after meeting of the "alternative mechanism" which was set up during past year to consider consolidation of the Indian Banking Sector. "Capital support, if any, to make it a big and global bank will be ensured", he added. As a result, the share of bad loans as a percentage to total loans has been rising. The gross Non -Performing Assets ratio will be around 13 percent with gross non- performing assets to be approximately around Rs 80,000 crores. During the UPA regime, the banks had not reported NPAs of just Rs 2.50 lakh crore, thereby concealing the seriousness of the problem. We were waiting, before moving forward, for the situation to start turning.

The Minister added that this indiscriminate lending of nature "as if there was no tomorrow" took a toll on the economy, which was followed by evergreening of loans and brushing the NPAs under the carpet.

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