Union Minister of Finance, Arun Jaitley claims that the merger will make the banks sustainable and stronger as well as maximize their ability to grant the loan. The Central government on Monday offered the merger of State-owned Bank of Dena Bank, Baroda, and Vijaya Bank to form the third largest bank of India as a bit of reform in the segment of public sector banking. The decision was held at a meeting of a ministerial panel led by Union Minister of Finance Arun Jaitley that supervises merger proffer of State-owned banks. Its other members are Minister of Defence Nirmala Sitharaman and Minister of Railway Piyush Goyal.
“This crucial decision was taken by a Substitute Mechanism today to merge Dena Bank, Bank of Baroda and Vijaya Bank. While forming this suggestion, we have carried in mind that we don’t want an amalgamation of what are comparatively weak banks,” said Mr. Jaitley. After that, he further added that “You can have two ably performing banks engrossing a weak one in the merger procedure and hopefully forming a megabank that will be justifiable, whose ability to grant loans will be so much higher.”
“Merger may take one year to accomplish”. This accompanies the amalgamation of the five partner banks of State Bank of India with itself. The government has also progressed to offload its mass stake in IDBI Bank to Life Insurance Corporation of India.
When asked about the option of banks, Mr. Jaitley claimed that this was the government’s judgment because one of the banks [Dena Bank] has been positioned under the framework of prompt corrective action. “We want to protect all the banks. When you make a combination, you want to make sure that the merged organization is a stronger organization or not. Therefore, our capacity to carry that weaker bank into the combined entity, which will be a better bank, is the main factor that weights with the government. It is obvious, we see the all India reach and so on.” He said in addition that the government would now wait for the reply of the banks on the offer.
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“The Substitute Mechanism extracted the view that ambitions of the fastest growing economy have to be assisted by stronger and competitive banks all over the world with the rise in options for the stakeholders. As a result, it was proposed to amalgamate the three banks which are Dena Bank, Baroda and Vijaya Bank,” said by Rajiv Kumar who is Secretary of Department of Financial Services.
Enlisting the advantages, Mr. Kumar claimed that the proposal required that the combined entity would be the third largest bank in India. “It would be a great competitive bank with the increased level of production. The entity would also be placed for a considerable increase in market reach, customer base, and operational efficiency.”
Interests of Employees’ will be saved
The interests of employees’ would be saved and brand equity conserved. “Capital assistance, if any, to make it a large and global bank will be made certain that it will occur,” he said. As an official briefing the information of this decision, Mr. Jaitley claimed that the public sector banks (PSBs) were so many in amount and saw “high granting of the loan” of Rs 55 lakh crore from the years 2008 to 2014. Before 2008, the total value of loan granted by the bank stood at Rs 18 lakh crore, Union Minister of Finance Arun Jaitley said.
“The nature of the granting was used to be very high as if there is no tomorrow. The banks have to be vacated before 2014. And that took its charge on the economy. This was followed by another step which was actually to move the NPAs [non-performing assets] below the carpet. So, that the actual picture does not come out. NPAs value Rs. 8.5 lakh crore were manifest to be 2 lakh crore,” said the Minister.
When asked about the rising fuel prices along with diminishing value of rupee against the dollar, Mr. Arun Jaitley professed that “These are effects of a very notable global occurrence that are taking place nowadays. You have at least three, if not more, globally coming on the character of things occurring.”
“One is the press which has been implied on oil production disappointing the ration of demand-supply which is sloping upwards the prices of crude oil. The second reason is the trade war and we are not sure about when we are going to see it end. It affects a major currency in our region that is China, and that, of course, forms a disturbance in this region. The third is the internal economic settlement of the country U.S., which is resulting to further strengthening of the dollar,” he said in addition to his statement.