Government announces amalgamation of 3 banks!
Three
banks merger to be India’s third largest bank
Bank
of Baroda, Vijaya Bank and Dena Bank may consider
The
Alternative Mechanism comprising of its Chairperson, the Union Finance Minister
Shri Arun Jaitley and Cabinet Ministers, Shri Piyush Goyal and Ms. Nirmala
Sitharaman met here today in New Delhi and decided that Bank of Baroda, Vijaya
Bank and Dena Bank may consider amalgamation of the three banks.
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, making it India’s
Third Largest Bank.
The
consolidation will help create a strong globally competitive bank with
economies of scale and enable realisation of wide-ranging synergies. Leveraging
of networks, low-cost deposits and subsidiaries of the three banks has the
potential of yielding significant synergies for positioning the consolidated
entity for substantial rise in customer base, market reach, operational
efficiency, wider bouquet of products and services, and improved access for
customers.
Some
of the strengths of the envisaged amalgamated entity are: 1: Provision Coverage
Ratio (PCR) at 67.5% is well above Public Sector Banks (PSBs) average (63.7%),
and steadily increasing, 2: Net NPA ratio at 5.71% significantly better than
PSB average (12.13%), and declining further, 3: Gross NPAs for the combined
entity have started declining (decline of Rs. 1,048 crore in Q1).
4:
Cost to income ratio of the combined entity at 48.94% better than the PSB
average of 53.92%, 5: Dena Bank’s strength in MSME will further augment the
strength of the other two to position the amalgamated bank for being an MSME
Udyamimitra, 6: Capital Adequacy Ratio (CRAR) at 12.25% is significantly above
the regulatory norm of 10.875%.
7:
stronger amalgamated bank will be better positioned to tap capital markets, 8: Significant
cost benefits from synergies: Larger distribution network will reduce operating
and distribution costs with benefits for the amalgamated bank, its customers
and their subsidiaries, 9: Global network strength of Bank of Baroda will be
leveraged to enable customers of Dena Bank and Vijaya Bank to have global
access, 10: Access improvement through amalgamation of networks & 11: Wider
range of products and services through leveraging of bank subsidiaries and
leveraging of a larger network for offering more value-added non-banking
services and products.
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