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Merger in Banking industry- A Step to curb NPAs.




Merge to Form India's 3rd Largest Bank
Three state-run banks - Dena Bank, Vijaya Bank and Bank of Baroda - will be merged to create the third-largest bank in the country, the government said on Monday as part of efforts to clean up the country's banking system.
The government will continue to provide capital support to the merged bank. The announcement, made by Financial Services Secretary Rajiv Kumar during a press conference with Finance Minister Arun Jaitley, comes as the country's banking sector grapples with non-performing assets or NPAs.

The proposal will be sent to the boards of the three banks, which needs to approve it, before any further process, Rajiv Kumar said. He added that the sector needs reforms and the government is taking care of banks' capital needs.
Rationalisation of overseas operation in banking sector is in full swing, he said, adding the government is keen to take steps so that history isn't repeated as far as NPAs are concerned.
The three banks will continue to function independently till the merger.
Speaking at the press conference, Finance Minister Arun Jaitley said that the government had announced in the budget that consolidation of banks was also in our agenda and the first step has been announced.
"No employee will face any service conditions which are adverse in nature. The best of the service conditions will apply to all of them," he added.

Earlier the government merged State Bank of India’s associate banks with the parent, and let Life Insurance Corporation take over bad debt-ridden IDBI Bank. Unions have opposed both the moves.
Before the asset quality review of the central bank, the bad debts declared by banks were Rs 2.5 trillion. After the review, they turned out to be Rs 8.5 trillion, as banks resorted to “restructuring and evergreening of loans”.

Currently, state-run State Bank of India, and private sector peers HDFC Bank and ICICI Bank are the three largest banks in the country.
Five associates and the Bharatiya Mahila Bank became part of the State Bank of India (SBI) in April last year.



Regards,
Gaurav Gupta,
Semi qualified Company Secretary
Former legal Associates,
Compliance Chambers
+91 9718777332




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