CABINET APPROVES MERGER OF VIJAYA BANK, DENA BANK WITH BANK OF BARODA
04, Jan 2019
Prelims level : Mains level :
- 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.
- Critically analyse the process of merging banks and bring out the advantages of larger merged banks.