Moody’s: Merger of BoB, Vijaya Bank, Dena Bank to improve efficiency, governance

19 September, 2018, 01:03 | Author: Gerard Cortez
  • Centre announces merger of three banks

The Centre has made a decision to merge three state-run banks - Bank of Baroda (BoB), Dena Bank and Vijaya Bank - which will create the third-largest lender in the country.

Jaitley said the merger would create a sustainable mega-bank which would be third largest in the country.

The government on Monday announced the decision and said that it is being done as part of efforts to revive country's economic growth and credit system.

This is the third major restructuring in the public sector banking space undertaken by this government. Many in the market believe that the stressed lender could be merged with banks in the South.

The government says that three banks will continue to work independently post merger and there won't be any job loss.

The amalgamated bank would be the third largest bank in India and will be strong competitive lender with economies of scale, he said adding the three would have synergies for network, low-priced deposits and subsidiaries.

Notably, this would be the second big merger in the banking sector after the merger of SBI associate banks with the SBI. "No employee will face any adverse service conditions after the amalgamation". Top lender State Bank of India a year ago merged with five of its subsidiary banks and took over Bharatiya Mahila Bank, catapulting it to be among top 50 global lenders.

U.S. House panel backs bill to make Trump tax cuts permanent
In the meantime, major media outlets continue to credit former president Barack Obama for the economy. "Still plenty to do!" Trump often cites the tax cuts enacted by Republicans as one of the driving forces behind the economy's aggressive growth.

Consolidation is always anticipated to be disadvantageous for the stronger banks. "After the government in principle makes this opinion, it suggests to the banks to consider it and we await the bank's consideration of it", he said.

Jaitley said while consolidation of banks was on agenda and was even announced in the Budget, the government was waiting for the non-performing assets (NPA) situation to take a turn for the better before going ahead. "That took a toll on the economy".

He said the RBI's asset review in 2015 revealed the total NPAs were actually to the tunes of Rs 8.5 lakh crore, not Rs 2.5 lakh crore.

Unsurprisingly, BoB share price plunged a whopping 16 per cent to Rs 113.45 in Tuesday's trade, while Dena Bank hit upper circuit of 20 per cent, and Vijaya Bank settled at Rs 56.40, down 5.69 per cent.

The government's Monday announcement signaled that this alternative approach may be tried out in the future too as a step to address the weakness in the banking system which is saddled with almost Rs 9 lakh crore of bad loans.

"This was accompanied by sweeping the NPAs below the carpet so that the real picture doesn't come out", Jaitley added.

Recommended:



Popular

Coca-Cola to get into the cannabis business? ‘The space is evolving quickly’
Cannabidiol, a constituent of cannabis, can help ease inflammation, pain and cramping, but has no psychoactive effect . The company is interested in cannabidiol oil in particular, one of two primary marijuana molecules.

NASA launches laser satellite ICESat-2 to measure ice loss
ICESat-2 was first proposed in 2008, but construction didn't begin until 2010, with an estimated launch date in 2015. EDT Saturday, embarking on its mission to measure the ice of Earth's frozen reaches with unprecedented accuracy.

Brett Kavanaugh: accuser of Trump's Supreme Court pick goes public
Christine Blasey Ford , a research psychologist and professor at Palo Alto University, had alleged in a letter sent to Sen. Dianne Feinstein became public over the past week, she chose to go ahead and speak out herself, Sunday's report said.

Amazon founder Jeff Bezos to start two billion dollar charitable fund
Most important among those will be genuine, intense customer obsession", he wrote on Twitter. "We're going to push through this". He said the schools would "use the same set of principles that have driven Amazon" and that "the child will be the customer".

4 dead as Hurricane Florence drenches the Carolinas
Cooper cited a National Weather Service forecast that said almost the entire state could be covered in several feet of water. Officials said some 1.7 million people in the Carolinas and Virginia were warned to evacuate, but it's unclear how many did.

Secret code names for Meghan, Prince Harry and Cambridges revealed
Since tying the knot to Prince Harry in May, the former Suits star has seemingly adjusted to her new life as a royal beautifully. He told People her routine has changed since becoming a royal and there's one type of make-up she's not allowed to wear.

Tottenham to be without Lloris and Alli for Reds clash
In addition to them, Juan Foyth (thigh) and Moussa Sissoko (hamstring) will also miss the Premier League fixture with Liverpool. Tottenham Hotspur manager Mauricio Pochettino has forgiven Hugo Lloris .

Sarri says City and Liverpool are leading the race for EPL title
I don't know (the chances) he told me other things, he told me he wants to play but I don't know, I have to speak to him again. I think so, but I hope not. "I just want to do my best for this club, which has done a lot for me".

Liverpool vs Tottenham: Rampent!? Fans aren’t having a bar of Redknapp
Heung-Min Son is back following his Asian Games duty, but Dele Alli and Hugo Lloris are out injured. The two up front, plus Bobby, and then all the others had a normal break pretty much.

Rafa Benitez signals change in tactics for Newcastle's home game against Arsenal
Arsenal manager Unai Emery has responded to media suggestions of a rift between himself and playmaker Mesut Ozil . New coach Unai Emery doesn't want to let him leave, though, given his form at the start of the season.