The board of Dena Bank on Monday cleared the merger proposal with Bank of Baroda and Vijaya Bank that was proposed by the government last week.
The Mumbai-based lender is the first among the three to receive the board’s approval for the merger proposal.
In a notification to the exchanges, the lender said the consolidation would enable the creation of a bank with a business scale comparable with global banks and capable of competing effectively in India and globally.
Dena Bank is the smallest in the pack with a total business size of ₹1.73 lakh crore as at June end compared with Bank of Baroda’s ₹10.3 lakh crore and Vijaya Bank’s ₹2.8 lakh crore.
Dena Bank — the weakest among the three — is under the prompt corrective action framework of the Reserve Bank of India due to high level of non-performing assets which had led to negative return on assets.
Raising resources
Dena Bank said one of the reasons for the merger was to raise resources without depending on the government.
“To be more efficient in the changing environment, the banks in the public sector space need to be bigger to meet the credit needs of a growing economy, absorb shocks and have the capacity to raise resources without depending unduly on the exchequer,” it said.
The lender said the merger would result in a strong amalgamated bank, equipped with financial cushion to deal with post-amalgamation requirements during the stabilisation phase.
The merged entity will be third largest lender of the country after State Bank of India and HDFC Bank.
As on June end the total business size of the three entities together was ₹14.82 lakh crore.
“In addition, consolidation would also provide impetus for building banks with scale, ramping up credit growth, adoption of best practices across amalgamating entities for cost efficiency and improved risk management and financial inclusion through wider reach,” the bank added.
