The Board of Directors of Vijaya Bank has given its 'in-principle approval' to the merger of the bank with Bank of Baroda and Dena Bank. Earlier this month, the government announced plans to merge Bank of Baroda, Vijaya Bank and Dena Bank to create the country's third largest lender as part of efforts to revive credit and economic growth.
"The Board of Directors of the Bank at their meeting held today, i.e., September 29, 2018 has considered and decided to give its "in-principle approval" for amalgamation of Vijaya Bank along with Bank of Baroda and Dena Bank, in line with Department of Financial Services, Ministry of Finance, Government of India proposal dated September 17, 2018 subject to all stautory/regulatory approvals," Vijaya Bank said in a regulatory filing.
"Amalgamation would enable creation of a bank with business scale comparable to global banks and capable of competing effectively in India and globally. Greater scale and synergy would lead to cost benefits, higher productivity and efficiency of the banking system as a whole. In addition it would provide impetus for building banks with scale, ramping up credit growth, adoption of best practices across amalgamating entities for cost efficiency and improved risk management and financial inclusion through wider reach," the filing further stated.
The board of Dena Bank has already given its approval to the merger proposal. The amalgamation of the three banks would be through share swap which will be the part of the merger scheme.
While announcing the merger last week, financial services secretary Rajiv Kumar had said the merged entity would have better financial strength. Dena Bank's net NPA ratio will be at 5.71 per cent, significantly better than public sector banks' average of 12.13 per cent, he had said, adding so would be the provision coverage ratio at 67.5 per cent against average of 63.7 per cent and cost to income ratio of the combined entity would come down to 48.94 per cent as compared to average of 53.92 per cent.
Last year, State Bank of India had merged with itself five of its subsidiary banks and took over Bharatiya Mahila Bank, following a similar decision by the government.
The government owns majority stakes in 21 lenders, which account for more than two-thirds of banking assets in the Asia's third biggest economy.
Edited by Vivek Punj