In a bid to revive credit and economic growth, Centre on Monday announced the merger of state-owned Bank of Baroda, Vijaya Bank and Dena Bank to create the country's third-largest lender. Announcing the move, Finance Minister Arun Jaitley said that consolidation was always part of the government’s agenda and the merger of associate banks last year was a step in that direction.
“The consolidation will help create a strong globally competitive bank with economies of scale and enable the realisation of wide-ranging synergies,” Jaitley said.
In 2017, the government had merged State Bank of India and five of its subsidiary banks and taking over Bharatiya Mahila Bank, catapulting it to be among top 50 global lenders.
“Leveraging of networks, low-cost deposits and subsidiaries of the three banks have the potential of yielding significant synergies for positioning the consolidated entity for a substantial rise in customer base, market reach, operational efficiency, wider bouquet of products and services, and improved access for customers,” the finance minister said.
To support the government’s move to merge the three state-owned banks, Jaitley said, “We have borne in mind that we do not want a merger of relatively weak banks. You can have two well-performing banks absorbing the third one and hopefully creating a megabank which will be sustainable, whose lending ability will be far higher.”
Jaitley also assured that no employees will face a service condition which is in any way adverse in nature to its present condition.
“On the contrary, the SBI experience has been that amongst the merging entity and new entity, the best of service conditions continue to apply to all of them. So, the employee of relatively smaller banks will get an opportunity to improve the working condition,” he said.
Financial Service Secretary Rajiv Kumar said that the merged entity will have a better financial strength and its net NPA ratio will be at 5.71 per cent, significantly better than public sector bank (PSB) average (12.13 per cent).
(With PTI Inputs)