In a push for consolidation in the banking sector, the Union Government announced its plan to merge three state-run banks namely the Bank of Baroda (BoB), Dena Bank and Vijaya Bank. Post the merger, the resultant bank is expected to be the third largest lender, and this move follows earlier restructuring measures in the financial sector like the merger of the State Bank of India’s five subsidiaries with the parent bank.

The announcement on the merger of BoB, Dena and Vijaya Banks came after a meeting of the alternate mechanism ministerial panel consisting of Finance Minister Arun Jaitley, Railway Minister Piyush Goel and Defence Minister Nirmala Sitharaman. It is expected that the merger process could last for six months as all the requisite approvals from shareholders, regulators and government would be required. The financial services secretary while giving details of the merger proposal also assured that the government would provide adequate capital until the merger was complete.

The push behind consolidating the numerous state-run banks into a few large ones is primarily intended to develop operational synergies and ensure efficient functioning of PSBs which are also reeling under the effect of an NPA problem. In a bid to ensure that the merger process is smooth, the Finance Minister explicitly reassured employees about the security of their jobs and that there would be no adverse effect on their service conditions as well.