Bank of Baroda, Vijaya, Dena Bank Merger: 4 Facts You Should Know (#4 Is About Blunder)
Bank unions have vehemently opposed this unique, India's 1st 3-way merger
For the first time in India, three major banks are being merged into one, and this can cause turbulence all over.
Right from bank strike to opposition from bank employees, this 3-way merger has set a new precedent in Indian banking.
Check out 5 fats which you should be aware of.
Fact #1: The Purpose Of This Merger
Burgeoning losses, or technically speaking ‘Non Performing Assets’ is the real reason behind this controversial, yet the crucial decision by RBI and Govt. of India.
Dena Bank is the weakest link among three banks, as they have a debt of Rs 16,640 crore against total banking business of Rs 1.7 lakh crore. This is the highest among the three banks.
As per various analysts, in order to save Dena Bank, this merger has been made.
BoB is the strongest bank, with a turnover of more than Rs 10 lakh crore, while Vijaya Bank has a business of Rs 2.7 lakh crore
Fact #2: Date Of The Merger
This unique and unprecedented merger will take place as on April 1st.
The new banking behemoth, whose name has not yet been decided, will become India’s third largest public sector bank after SBI and PNB. This new bank, a combination of BoB, Vijaya and Dena Bank will have a market cap of Rs 14 trillion and a network of 9,489 branches, pan-India.
Fact #3: Opposition and Strikes
Bank Unions across India, especially those from these three banks have vehemently opposed this merger, and had announced a nation-wide strike on December 26th, wherein more than one million bank employees had participated.
Bank employees and Unions have stated that this 3-way merger, a first for India, is a big blunder and will destroy Bank of Baroda and Vijaya Bank, as Dena Bank’s liabilities will be now shared among the three. On the other hand, some banking veterans have called this decision by Govt. as a ‘bold move’.
Fact #4: Is This Merger A Major Blunder?
Banking experts from Mint have described this 3-way merger as a major blunder, wherein every party will be a loser.
First of all, the share swap ratio for Bank of Baroda, the strongest bank among these three with total banking business of Rs 10 lakh crore is 110:1,000, which is a huge, massive let down for their shareholders.
No wonder that BoB shares have underperformed by 12%, after this merger news came out.
Besides, the load of 13,000+ Dena Bank staff and their Rs 16,000 crore+ debt will bring down the growth of Bank of Baroda, and Vijaya Bank, which will impact entire banking industry.
Finance Minister Arun Jaitley has said that merging two strong banks with one weak bank will create a even bigger entity, and all bankers and financial experts are keeping their fingers crossed.
We will keep you updated, as more details come in.