Merger of Dena, Vijaya Bank with Bank of Baroda cleared

Wednesday 09th January 2019 01:35 EST

The Union Cabinet has approved the merger of Vijaya Bank and Dena Bank with Bank of Baroda (BoB), which will create the country's second-largest public-sector lender after SBI. The amalgamation will be the first-ever three-way consolidation of banks in India. Shareholders of the merging banks will receive Bank of Baroda shares. While Vijaya Bank's 1,000 shares will fetch 402 of BoB's, a similar number of Dena Bank shares will get only 110 of the acquiring bank. The swap ratio was announced by BoB following a board meeting.

Analysts believe that BoB will have to bear the pain of the merger, which would include fair valuation of assets and the cost of integration. The merged bank will have a loan book of over £78 billion, 9,475 branches, and a network of 13,544 ATMs. The government said the merger, which is effective from April 1, will bring a host of benefits. It, however, is unclear how the new management structure would evolve.

BoB CEO PS Jayakumar, who completed his term in October 2018, was given a one year extension by the government ostensibly to oversee the merger. Vijaya Bank MD and CEO RA Sankara Narayanan's term ends next January. Karmam Sekar, who moved from SBI to head Dena Bank, has the longest residual service among the three CEOs, until June 2020. One proposal that the government considered to reduce the disruptive impact of the merger was to retain the operations of the two merging banks as business units with their original business name for branch outlets with eventual amalgamation.

The Centre has clarified that there will not be any job loss and every permanent employee of the transferor banks shall become employees of BoB and receive employee benefits that are at least on a par with what they would have drawn earlier.

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