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Merger of Bank of Baroda, Dena Bank and Vijaya Bank and effects on the stocks of public sector banks

Three Nationalize Banks - Dena Bank, Vijaya Bank as well as Bank of Baroda - will be combined to develop the third-largest Bank in the nation, the Finance Ministry said on Monday, as the initiatives to clean up the nation's financial system.
The Finance Ministry will continue to give resources assistance to the merged entity. The statement, made by Secretary in the Department of Financial Services Rajiv Kumar in the press conference with Finance Minister Arun Jaitley. After the announcement, Dena bank share price rises by 20% where Bank of Baroda share price drops by 14 % and Vijaya Bank share price surged 10.36%.

As the government announced the merger of three nationalized banks Bank of Baroda, Dena Bank, and Vijaya Bank, the share price of the public sector banks made major moves on the day. While Bank of Baroda share price fell up to 13. 76%, Vijaya Bank share price surged 10.36% on the BSE. Their weaker part Dena Bank share price rises by 20 %.

The merger of these three Mega PSU Merger Bank follows the merger of five associate banks and also the Bharatiya Mahila Financial institution entered into the State Bank of India (SBI) in April in 2015, which assisted the nation's biggest loan provider to boost its range and also cut expenditures through the synergy of operations. According to Rajiv Kumar, that experience has resulted in good results. This helped the government to take this big step in banking merger by deciding to merge three public sector lenders.

Financing Minister Arun Jaitley included that the merging has been planned in such a way that the merged banks do not turn up being weak compared to the individual entities. There will be no adverse effect on customers of the specific bank as an outcome of the suggested merger, and no staff member of all three banks will deal with any problems. The best solution will set for all of them, Mr. Jaitley Stated.

What The New Merger Bank Will have?

The trio of Bank of Baroda, Dena Bank & Vijaya Bank will create a merger bank with a nation and worldwide reach. With Bank of Baroda already has a widely spread channels, Dena Bank and Vijaya Bank are more regionally dense and focused.

1)  The Mega PSU Merger Bank will hold total business of Rs 14.82 lakh crore.
2) The Mega PSU Merger Bank will maintain an advances base of Rs 6.4 lakh crore presenting it as the third largest bank behind SBI and HDFC Bank.
Presently, state-run State State Bank of India, and also private sector peers HDFC Bank and even ICICI Bank are the three most prominent and largest banks in the nation.
3) It will keep a deposit of Rs 8.41 lakh crore.
4) The gross NPA will be approximately around Rs 80,000 crore. So the gross NPA ratio will be around 13%.
5) Total No of Branches will be 9,489.
6) Total no of Employees will be 85,675.

The proposal will be sent out to the boards of the three banks, which have to authorize it, before any further proceedings, Rajiv Kumar claimed. He added that the banking field requires reforms, which government, is taking care of banks capital requirements.

For BOB, the merger will mean a stronger presence in the western and southern regions, said PS Jayakumar, the CEO of the BOB.

According to a former official of  Vijaya Bank, the bank had proposed the government to take control of Dena Bank. Likewise, Bank of Baroda had also offered government with a merger with Vijaya bank, he or she agreed on speaking on the condition of anonymity. It appears the federal government took this choice after thinking about both propositions, stated this authority.

The government predicts that at the end of this financial year the merger procedure will be completed. The three banks will continuously operate individually until the merger.

Rationalisation of overseas operation in the banking sector remains at full speed, Mr. Kumar stated, the government is keen to take actions to ensure that history doesn't repeat as for NPAs are worried.

Talking on the merging, Arun Jaitley stated that financial institution funding was getting to be low and weak, hurting corporate sector financial investments.

The government had revealed that the merger of banks was in the budget plan and the primary step has been introduced, he included.

In August last year, the government had set up a ministerial committee to speed up the merger of banks.

It has been felt that the Indian banking sector requires the merger as a result of the large no of government entities. Currently, there are 21 nationalized banks. This number minimizes to 19 after the merging.

Because a lot of these banks have similar working, it has been felt that merger is justified. Nevertheless, in the past, such a step has been highly opposed by staff members unions as well as governments have also avoided it due to caution.

With the news on Monday, the government has indicated that the merger of nationalize bank will stay on its plan and agenda. In the meantime, it appears like the government is working with integrating banks with an existence throughout various parts of the nation.


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