The board members of Dena Bank have recently approved the bank’s merger with Bank of Baroda and Vijaya Bank. The merger of the three public sector banks was proposed by the Government of India last week in an effort to create India’s second-biggest bank in terms of branches and assets. The same was announced by Dena Bank to the exchanges in a recent filing.
The consolidation of the three state-run banks is expected to create a single entity with a business scale that is comparable to international lenders and will also help the merged entity compete with other banks in the country and internationally. The amalgamated bank will be equipped with the required financial backing to deal with post-merger requirements that might arise during the stabilisation period. Mr. Rajiv Kumar, the Financial Services Secretary who announced the proposed merger last week, added that the amalgamated entity will have increased financial strength.
He added that Dena Bank’s non-performing asset (NPA) ratio will touch 5.71%, which is higher than the 12.13% average of public sector lenders. The bank’s provision coverage ratio of 67.5% is also higher than the industry average at 63.7%. The merged entity’s cost to income ratio will reduce to 48.94% against an industry average of 53.92%.
The combined business of the three banks, once they are merged, will make the amalgamated entity the second-biggest public sector bank, after the State Bank of India (SBI). The amalgamated business of the three state-run banks touched Rs.14.82 trillion, as on June 2018.
After the merger of Dena Bank, Vijaya Bank, and Bank of Baroda, the number of public sector banks in the country will reduce to 19.
Sources: The Times of India, The Economic Times