Vijaya Bank and Dena Bank to be merged with Bank of Baroda

Last Updated on March 6, 2019 by Bharat Saini

First-ever three way merger in Indian Banking with amalgamation of Vijaya, Dena and Bank of Baroda, wherein the amalgamated bank will be better equipped in the changing environment to meet the credit needs of a growing economy, absorb shocks and capacity to raise resources, was approved by the Union Cabinet chaired by Prime Minister Narendra Modi on Wednesday 2 January 2018, with Bank of Baroda as the transferee bank and Vijaya Bank and Dena Bank as transferor banks. Economies of scale and wider scope would position it for improved profitability and adoption of technology and best practices across amalgamating entities for cost efficiency and improved risk management, and financial inclusion through wider reach.

The amalgamation will help create a strong globally competitive bank that will enable realisation of wide-ranging synergies. Leveraging of networks will translate into advantages in terms of market reach, operational efficiencies and the ability to support a wider bouquet of product and services, and improved access for customers; as Dena Bank has relatively higher access to low-cost CASA deposits; Vijaya Bank has better profitability and availability of capital for growth, and Bank of Baroda  has extensive and global network and offerings.

The amalgamated banks will have access to a wider talent pool, and a large database that may be leveraged through analytics for competitive advantage in a rapidly digitalising banking context. Benefits would also flow as a result of wider reach and distribution network and reduction in distribution costs for the products and services through subsidiaries.

The scheme of amalgamation will come into force on 1 April 2019, with the amalgamated entity emerging as the country’s second largest Public Sector Bank after SBI. It would also be the country’s third largest lender, if we include ICICI Bank Limited – Indian multinational banking and financial services company.

• Upon commencement of the scheme of amalgamation, the undertakings of the transferor banks as a going concern shall be transferred to and shall vest in the transferee bank, including, inter alia, all business, assets, rights, titles, claims, licenses, approvals and other privileges and all property, all bor­rowings, liabilities and obligations.
• Every permanent and regular officer or employee of the transferor banks shall become an officer or employee and shall hold his office or service therein in the transferee bank such that the pay and allowance offered to the employees/officers of transferor banks shall not be less favourable as compared to what they would have drawn in the respective transferor bank.
• Board of the transferee bank shall ensure that the interests of all transferring employees and officers of the transferor bank are protected.
• The transferee bank shall issue shares to the shareholders of transferor banks as per share exchange ratio.
• The fair equity share exchange (share swap) ratio for the amalgamation to come into effect on April 1 as finalised by Banks’ board share swap ratiois:
  • 402 Equity shares of ₹2 each of Bank of Baroda for every 1000 equity shares of ₹10 each of Vijaya Bank; and
  • 110 equity shares of ₹2 each of Bank of Baroda for every 1000 equity shares of ₹10 each of Dena Bank.
• Shareholders of the transferee bank and transferor banks shall be entitled to raise their grievances before Grievance Redressal Committee (GRC) headed by Pramod Kode, a retired judge of Mumbai High Court that has been set up to address the grievances of minority shareholders and grievances in relation to the share exchange ratio.
• Minority shareholders are:
  • Those shareholders who either individually or collectively hold at least one per cent of the total paid-up equity capital of Bank of Baroda or Vijaya Bank or Dena Bank; or
  • 100 shareholders of Bank of Baroda or Vijaya Bank or Dena Bank acting collectively

Public at large shall benefit in terms of enhanced access to banking services through a stronger network, the ability to support a wider offering of product and services, and easy access to credit.