The Indian government on Monday, 17 September, announced the amalgamation of three public sector lenders- Bank of Baroda, Dena Bank and Vijaya Bank.
The announcement was made after a meeting of the ‘alternative mechanism’ set up last year to consider consolidation in the banking sector.
The proposal will now need to be passed by the boards of individual banks.
The merger of these three lenders follows the merger of State Bank of India and its associate banks in 2017. That experience, according to Rajiv Kumar, secretary in the Department of Financial Services, has yielded good results.
This prompted the government to take the next step in banking consolidation by deciding to merge three public sector lenders, said Kumar.
The merger of Bank of Baroda, Vijaya Bank and Dena Bank will create a lender which will be the third largest in India.Rajiv Kumar, Secretary, Department of Financial Services
Finance Minister Arun Jaitley added that the merger has been conceived in a way that the combined bank does not end up being weaker than the individual entities.
He added that there will be no adverse impact on employees and customers of the individual banks as a result of the proposed merger.
In the first step of consolidation, we consolidated the subsidiaries of SBI with the parent bank to create a mega global bank. LIC, which has been keen to acquire a bank for some time, has made an offer for IDBI Bank because it suited their interests...We were waiting, before moving forward, for the situation to start turning. And therefore, now the alternative mechanism has gone ahead and taken this decision today.Arun Jaitley, Finance Minister
(This article was originally published in BloombergQuint)
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