Government to merge BoB, Vijaya and Dena to create new banking giant
On Monday the 17th, the government of India declared the merger of three state-run banks to create a new banking giant. These three banks are the Bank of Baroda, Vijaya Bank and the Dena Bank. This merger shall lead to the creation of India’s third-largest lender. After years of discussion, this step has finally commenced a consolidation in the nationalised banking space.
The ministerial panel that came to the decision included Union Finance Minister, Arun Jaitley, Railway Minister, Piyush Goyal and Defence Minister, Nirmala Sitharaman.
Finance services secretary, Rajiv Kumar said that the aspirations of the fastest growing economy must be supported stronger and globally competitive banks. There should also be increased choices for the stakeholders. The boards of Bank of Baroda, Dena Bank and Vijaya Bank have been advised to consider the proposal. This is for the consolidation of the three.
The dates for the board meetings have not been finalised yet. The banks will await a formal communication from the government. Officials have estimated that the whole process will take about six months including shareholder, regulatory and government approvals.
This is the fourth major restructuring initiated the Narendra Modi government in the financial sector. The first one was the merger of State Bank of India’s five associate banks with their parent. This was along with the Bharatiya Mahila Bank.
After that, the government announced the merger of three state-run general insurers. It also allowed LIC to acquire a majority stake in troubled lender IDBI Bank.
While announcing the amalgamation of the three banks to create a new banking giant, Jaitley assured employees that their jobs will be protected and the service conditions won’t be diluted.
It is the belief of the government that a merger to create a new banking giant will improve the operational synergy of the three banks. This shall help create larger Indian lenders in place of small businesses.
A very good step