The Union Cabinet on Wednesday approved the proposal to merge Bank of Baroda (BoB), Vijaya Bank and Dena Bank.
The merger will become effective from April 1. Amid banking crisis, in September last year, the government had proposed to merge BoB, Vijaya and Dena as one entity with an aim to make it India’s third largest bank.
Of the three banks, Dena Bank is the weakest bank with highest NPA ratio of 11.04% and lowest business of merely Rs 1.72 lakh crore as compared to 5.4% NPA and Rs 10.2 lakh crore worth business of Bank of Baroda and 4.10% NPA and Rs 2 lakh crore worth business of Vijaya Bank.
The approval to merge the banks has come amid protests by bank unions and employees who are of the opinion that the move will neither help the banks nor the customers. Finance Minister Arun Jaitley had said that banks were chosen keeping in mind that the merger of two strong banks with one weak bank will lead to a strong entity.
The BOB-Vijaya-Dena merger will be the first three-way merger in India’s history. Even as experts have been divided on the decision as a way to mitigate high NPAs and poor management, some banking veterans have called it a bold move.