Bank of Baroda-Vijaya-Dena merger: Gainers, losers, swap ratio and more

The three banks will, however, continue to work independently post-merger. The boards of the banks would meet separately to clear the merger.

At present, state-run State Bank of India (SBI), private sector banks HDFC Bank and ICICI Bank are the three largest banks in the country. "Dena Bank clearly remains the biggest beneficiary from this announcement", it said.

The merged entity will have total assets of more than Rs 14 lakh crore.

"Alternative mechanism under Finance Minister, Arun Jaitley suggests bankofbaroda, VijayaBankIndia & dena_bank to consider amalgamation; to create India's 3rd largest globally competitive bank", he tweeted on Monday evening.

Jaitley said the merger would create a sustainable mega-bank which would be third largest in the country.

"Capital Adequacy Ratio (of the amalgamated bank) at 12.25 per cent is significantly above the regulatory norm of 10.875 per cent and the stronger amalgamated bank will be better positioned to tap capital markets", the government said.

Rumours had been rife in June that the loss-making Dena Bank would be merged with Baroda.

R.A. Sankara Narayan, Vijaya Bank CEO & MD, told a TV channel he had got to hear about the merger proposal only after the news conference. Rather, the merger of two strong banks and one weak bank seemed to be a more viable option, keeping in the mind the long-term sustainability of the merged entity and the potential for expansion. Rationalisation of overseas operation in banking sector is in full swing.

Jaitley said the truth of the bad loan crisis was revealed only in 2015 because the previous UPA government had been sweeping the problem under the carpet. He alleged that banks undertook above-normal lending during 2008-2014 as "if there was no tomorrow" resulting in huge non-performing assets to the tune of Rs 8.5 lakh crore. Uco Bank had the annual loss at Rs 4,436 crore with nearly a quarter of its loans turning NPAs. LIC, which has been keen to acquire a bank for some time, has made an offer for IDBI Bank because it suited their interests.

Jaitley said the government took a series of steps to tackle the NPA challenge including the Insolvency and Bankruptcy Code "which was a defining moment in creditor-debtor relationship".

Unsurprisingly, BoB share price plunged a whopping 16 per cent to Rs 113.45 in Tuesday's trade, while Dena Bank hit upper circuit of 20 per cent, and Vijaya Bank settled at Rs 56.40, down 5.69 per cent.