Cabinet nod for merger of Vijaya Bank and Dena Bank into Bank of Baroda
02 January 2019
The union cabinet chaired by Prime Minister Narendra Modi today approved a scheme of amalgamation for Bank of Baroda, Vijaya Bank and Dena Bank, with Bank of Baroda as the transferee bank and Vijaya Bank and Dena Bank as transferor banks.
The first-ever three-way consolidation of state-run banks in India will also create India's second largest public sector bank. It will help create a strong globally competitive bank with economies of scale and enable realisation of wide-ranging synergies, according to a cabinet release.
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, it noted.
The merger will combine Dena Bank's relatively higher access to low-cost CASA deposits, Vijaya Bank's profitability and availability of capital for growth, and the extensive and global network and offerings of BoB into advantages in terms of market reach, operational efficiencies and the ability to support a wider offering of product and services, it added.
Under the scheme of amalgamation, Vijaya Bank and Dena Bank will merge into Bank of Baroda, which is the transferee bank and the scheme will come into force on 1 April 2019.
Upon commencement of the scheme, the undertakings of the transferor banks as a going concern will be transferred to and shall vest in the transferee bank, including, inter alia, all business, assets, rights, titles, claims, licences, approvals and other privileges and all property, all borrowings, liabilities and obligations.
Every permanent and regular officer or employee of the transferor banks will become an officer or employee of the merged entity and hold his office or service therein in the transferee bank such that the pay and allowance offered to the employees/officers of transferor banks shall not be less favourable as compared to what they would have drawn in the respective transferor bank.
The board of the transferee bank will ensure that the interests of all transferring employees and officers of the transferor bank are protected, the cabinet note said.
The transferee bank will issue shares to the shareholders of transferor banks as per share exchange ratio. Shareholders of the transferee bank and transferor banks shall be entitled to raise their grievances, if any, in relation to the share exchange ratio, through an expert committee.
According to the cabinet note, the amalgamated bank will be better equipped in the changing environment to meet the credit needs of a growing economy, absorb shocks and capacity to raise resources. Economies of scale and wider scope would position it for improved profitability, wider product offerings, and adoption of technology and best practices across amalgamating entities for cost efficiency and improved risk management, and financial inclusion through wider reach.
It would also enable creation of a bank with scale comparable to global banks and capable of competing effectively in India and globally.
The amalgamated banks will have access to a wider talent pool, and a large database that may be leveraged through analytics for competitive advantage in a rapidly digitalising banking context. Benefits would also flow as a result of wider reach and distribution network and reduction in distribution costs for the products and services through subsidiaries.
Public at large will benefit in terms of enhanced access to banking services through a stronger network, the ability to support a wider offering of product and services, and easy access to credit, it added.