Merger of BoB, Vijaya, Dena banks in 4-6 months: BoB MD

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SME Times News Bureau | 18 Sep, 2018
As the government on Monday proposed amalgamation of Bank of Baroda (BoB), Vijaya Bank and Dena Bank into the country's third-largest bank, BoB Managing Director P.S. Jayakumar said it may happen in four to six months.

"Going by past practices, the merger may take four to six months. It can be speeded up also...it depends," Jayakumar told reporters after Finance Minister Arun Jaitley and Financial Services Secretary Rajeev Kumar announced the proposal here.

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. The combined entity will have a net NPA ratio at 5.71 per cent, better than public sector banks (PSB)'s average of 12.13 per cent.

"With the benefit of scale working in, with greater distribution and more opportunities for products for costumers etc., a reasonable assumption is that there will be good opportunity to come but it is something that will happen in due course," he said.

The boards of the three state-run banks are expected to meet shortly and consider the government's proposal and decide the merger ratio and other details of the scheme of amalgamation. The government's shareholding will be as per the merger ratio.

Financial Services Secretary Rajeev Kumar said the biggest beneficiary of the merger is the amalgamated entity and the banking industry, as it aims to get scale, synergy and reach for the benefit of the customers.

"It is in tune with the sixth largest economy in the world. You need a global reach. Both Dena Bank and Vijaya Bank will get that global reach through BoB and BoB will get a much sounder credit culture in the Vijaya Bank. It's futuristic where you have large global banks," Kumar said.

BoB MD and CEO Jayakumar said while it will benefit loss-making Dena Bank, BoB will be benefited by its stronger presence in Maharashtra and Gujarat, and by having more branches in under-represented four southern states.

"BoB brings a huge foreign currency position to the table, technology is there and there are lot of things we are doing in the transformation journey which will be value to them (Vijaya Bank and Dena Bank).

"The new entity will benefit from a better CASA ratio of Dena Bank. The loan book will get diversified more into retail and MSME from a corporate exposure perspective. The loan book of BoB will go up by 40 per cent in the combined entity," he said.

CASA ratio is the ratio of deposits in current and saving accounts to total deposits. Higher CASA ratio indicates lower cost of funds for banks.

"It is a progressive move and signifies the government's determination to strengthen the banking sector in the country," industry body FICCI President Rashesh Shah said.

"This merger will lead to greater operational efficiencies and the entities involved would benefit through a synergistic relationship that would leverage each other's network, customer base and access to low-cost deposits," he said.

Though the government has assured there will be no job cuts, Delhi State Bank Workers Organisation General Secretary Ashwani Rana opposed the decision.

"The government's decision to merge the banks is not correct and the unions oppose it. There is no guarantee that it will benefit the banks, its employees and customers. Also, it is less likely to impact the NPA as was seen in SBI's case. It will have an adverse impact on the current employees," Rana said.