The government on Monday said 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 the Bharatiya Mahila Bank, a niche state-run lender for women.
The Minister pointed out that bank lending was becoming weak, hurting corporate sector investments. Also, many banks were in a fragile condition due to excessive lending and ballooning non-performing assets (NPAs). “This amalgamated entity will increase banking operations,” he said.
As was in the case of SBI, no employee of the three banks would have service conditions that were adverse to their present one. The government owns majority stakes in 21 lenders, which accounted for more than two-thirds of banking assets in the Asia’s third biggest economy.
But these banks also accounted for the lion’s share of bad loans or NPAs plaguing the sector and needed crores of rupees in new capital in the next two years to meet global Basel III capital norms.
Boards of the banks to examine proposal
Financial Services Secretary Rajiv Kumar said bank boards of the three banks would examine the amalgamation proposal. “The merger will help improve operational efficiency and customer services.”