Govt proposes to merge Dena Bank, Vijaya Bank and Bank of Baroda

Govt proposes to merge Dena Bank, Vijaya Bank and Bank of Baroda

 News

1. The government has proposed merger of three public sector banks i.e., Bank of Baroda, Vijaya Bank and Dena Bank.

Important fact

2. To create India’s third largest bank with a total business of more than Rs 14.82 lakh crore.
3. This step will particularly help Dena Bank, the weakest of the three, which is currently under the Prompt Corrective Action (PCA) framework
4. PCA

• It is an action taken by Reserve Bank of India, when banks breach certain regulatory requirements like minimum capital, return on asset and quantum of non-performing assets
• In this framework, banks are restricted from expanding number of branches, staff recruitment and from increasing the size of their loan book.
• Apart from Dena Bank, ten other banks are currently under the PCA

5. It will follow the merger of the five associate banks of State Bank of India with itself.  And the government move on Life Insurance Corporation of India’s proposal to acquire majority stake in IDBI Bank.
6. Advantages of merger

• The lending ability of this bank will be far higher.
• It will reduce the amount of capital required by the government to pump into these lenders and will help clean their balance sheets.
• The merged entity will have the ability to expand its banking operations, with the specific ability of the banks will add up to provide better operations:
• Dena Bank has a strong CASA (current account savings account) base and a strong MSME portfolio.
• Vijaya Bank has a strong credit culture and
• BOB is an aspirational bank with a strong global reach and is technologically sound.
• No employee will face any adverse service conditions after the merger
• Merger of the banks will helps India’s fastest growing economy, which need stronger and globally competitive banks