State-owned lenders Vijaya Bank, Bank of Baroda, and Dena Bank have reportedly decided to set up internal committees to integrate their functions ahead of the planned merger. The Chief Executive Officers of these banks met on Wednesday to discuss the terms of the merger. It is also revealed that these bankers have also decided to appoint separate valuers to decide the share swap ratio for the transaction.
The internal committees of these banks will comprise Chief Executive Officers and Executive Directors of the Board. Committees will be formed in various departments like credit, information technology, and human resources to facilitate this merger.
The government announced the merger of these three banks on September 10th. Once these banks are merged, it will create the third largest bank in India next to State Bank of India and HDFC. The total business of this merged entity will be over Rs.14.82 trillion. The management of the three banks has assured their staff that the individual identities of these banks will be retained even after the merger.
The merger process is recommended by the government to improve the operational efficiency of the banks and customer service. Following the merger, the government will provide its support for the capital requirements of the lender. The merged entity will have about 2,205 branches in Western India, 846 branches in South India, and 713 branches in North India.
This is one of the major restructuring exercises witnessed in India. Last year, India’s largest lender State Bank of India absorbed five of its associate banks and Bharatiya Mahila Bank. While the merger was aimed at achieving operational efficiency, it also increased the bad loan portfolio of SBI significantly. This also significantly reduced SBI’s profitability for the fiscal year 2017.