In News:

Context:

• The Cabinet has approved the merger of Vijaya Bank and Dena Bank with Bank of Baroda. Vijaya Bank and Dena Bank are transferor banks and BoB is the transferee bank.
• The amalgamation will be the first-ever three-way consolidation of banks in India, with the amalgamated entity emerging as the country’s second largest public sector bank.

Scheme of Amalgamation:

• Union Cabinet approved a scheme of amalgamation for the same and the board of the respective banks giving their nod to the share swap ratio.
• The fair equity share exchange (share swap) ratio for the amalgamation is: 402 equity shares of ₹2 each of BoB for every 1,000 equity shares of ₹10 each of Vijaya Bank; and 110 equity shares of ₹2 each of BoB for every 1,000 equity shares of ₹10 each of Dena Bank.
• The scheme will come into effect from 1st of April this year. 
• The pay and allowances and services of the employees of all three banks will remain same as earlier.

The Need for the Merger:

• The move will help create a strong globally competitive bank with economies of scale and enable the realization of wide-ranging synergies, leveraging of networks and low-cost deposits and substantial rise in customer base and operational efficiency. 

Mains Question:

• Critically analyse the process of merging banks and bring out the advantages of larger merged banks.