The big bank merger is coming up with Government announcing the merger of three Public Sector Banks viz Bank of Baroda, Vijaya Bank and Dena Bank.
- The merger is aimed at creating the country’s third largest bank only next to SBI and HDFC Bank.
- This forms a Government’s move in consolidation of banks and a big move in banking reforms.
- The board of the three banks should now meet and consider the proposal.
- Combined bank will have 34% of low cost deposits and a total turnover of over Rs. 14.82 lakh crore and a capital buffer of 12%.
- These three banks have been advised to meet and take a decision by the Finance Ministry.
- This is aimed to reduce the overall costs and handle customer issues in a better.
- Also these banks possibly would be cutting their branches which are near to each other.
- All the three banks are in the same core banking system which will make the merger process easier. Their brand equity of all the banks will be kept in tact.
- Merger would make rooms for lending to top companies and make the capital requirements simpler.
- Integration and rationalising people would be the primary task which appears to be difficult.
- Though the capital requirements would become simpler, the combined employee strength of these three entities would be 85,675 which should be taken into account.
- Other important challenge would be how these corporate focussed banked shift to the retail section using their network, especially Vijaya Bank and Dena Bank.