Cabinet approves Vijaya Bank, Dena Bank, Bank of Baroda merger
On Wednesday, the Union Cabinet approved the merger of state-run Vijaya Bank and Dena Bank with the larger Bank of Baroda (BoB). The merger, which had earlier been opposed by bank unions, marks the first-ever three-way merger in the Indian banking sector. It also makes BoB the third-largest bank in India, after State Bank of India (SBI) and HDFC Bank. Here are the details.
The merger had been proposed in September 2018
The proposed merger of Vijaya Bank and Dena Bank with the larger BoB was announced by the government in September 2018, under the prompt corrective action (PCA) policy of the Reserve Bank of India (RBI). The idea behind the merger was to create a global-sized, strong, and sustainable lender. However, bank unions had protested the merger by taking out multiple strikes.
What we know about the terms of the merger
Under the terms of the merger, BoB will be the transferee bank, while Vijaya Bank and Dena Bank will be the transferors. This essentially means that undertakings owned by Vijaya Bank and Dena Bank, including assets, liabilities, rights, titles, claims, licenses, approvals, privileges, and properties, will go to BoB. The merger will come into force on April 1, 2019.
What we know about the share swap ratios
Share swap ratios have also been finalized. Under the agreement, Vijaya Bank shareholders will get 402 BoB equity shares of face value Rs. 2 for every 1,000 shares held, while Dena Bank shareholders will get 110 BoB equity shares of face value Rs. 2 for every 1,000 shares held.
What will happen to Vijaya Bank, Dena Bank employees?
Further, under the agreement, all permanent and regular employees of Vijaya Bank and Dena Bank will be transferred to the merged entity. The Board of Bank of Baroda, for its part, has promised to "ensure that the interests of all transferring employees and officers of the transferor bank are protected". The government has also said that the merger will have "no impact on the service conditions of the employees".
