The government on Monday announced its scheme to merge three public sector banks (PSBs) viz. Bank of Baroda (BOB), Vijaya Bank, and Dena Bank, giving birth to nation’s third-largest lender. The decision was taken to combat a clump of bad loans and asset stress afflicting the banking sector.
The merger has ruffled the stock market by diminishing the share of Bank of Baroda by 14% and lifting the Vijaya Bank by 1.25 percent and Dena Bank by 19.75 percent. Out of three banks of Bank of Baroda is the biggest bank with a total business of Rs 10.29 lakh crore, followed by Vijaya Bank at Rs 2.79 lakh crore and Dena Bank at Rs 1.72 lakh crore, making the total business of new bank 14.82 lakhs. Capital to risk-weighted assets ratio (CRAR) of Bank of Baroda is 12.13%, whereas of Vijaya Bank and Dena bank is 13.91% and 10.6% respectively.
Where in one hand Vijaya Bank shares traded at Rs. 60.55, up Rs. 0.75, Dena Bank shares traded at Rs. 19.10, up Rs. 3.15 on the BSE, Bank of Baroda on the other hand, traded at Rs.120.10, down Rs. 15.00 or 11.10 percent on the Bombay Stock Exchange (BSE).
Arun Jaitley said the merger will make the banks stronger and sustainable as well as increase their lending ability. The government assures there will be no loss in the jobs. However, Reserve bank of India (RBI) is constantly being asked to prepare a list of government-owned banks and acquaint people with the time frame.
Economists and analyst have a different view altogether in this scenario, where Dhananjay Sinha, head of research, economist finds this plan to lack solidity, credit rating agency Moody’s thinks of this as a positive action.