Seminar report

On
Merger of bank of baroda, vijaya
and dena bank
Submitted to : Submitted by:shilpa
Class roll no: 4027
Mrs vijay laxmi University roll no: 21761817027
Assiatant professor
 Merger is an agreement that unites two existing
companies into one new company. The government
in September 2018 announced the merger of state
owned VijayaBank and Dena bank with larger PSB
Introduction Bank of Baroda to create third largest lender after
Sbiand ICICI bank in the country. The merger plan
got the Union cabinet Nod in January. This is the first
three way merger in the Public sector banking. 11
march 2019 is recorded date as issuing and alloting
equity shares of the Bank of Baroda to the
shareholders of VijayaBank and Dena Bank and
merger shall come into force on 1April2019.
 Bank of Baroda will become the third largest lender in the
country and second largest public sector bank. The
amalgamation reflects the government focus on

Why merger of consolidating and strengthening of public-sector banking

and also to deal with the raising problematic issues like
Dena Bank and non-performing assets(NPA) and default of loans . The
VijayaBank with primary objective of this amalgamation is aimed at
Bank of Baroda is improving the customer base, consolidating the public-
sector banking and enabling merged entity to compete at
Important global level. This amalgamation will present Bank of Baroda
as the global conglomerate in the banking sector aiming to
achieve the higher working efficiency , financial stability
and wider operationally.
 On 2january 2019 union cabinet approves the
first three way merger. Union Minister Ravi
shankar prasad says the merger will allow the
combined entity under Bank of Baroda more

Cabinet approves leading power. After merger BoB will become

the third largest bank in India. BOB will now
merger of have a global competitive identity. As per the
VijayaBank and scheme of amalgamation, the shareholders of
Dena bank with VijayaBank will get 402 equity shares of BOB
for every 1000shares held. In case of Dena
Bank of Baroda bank, it’s shareholders will get 110shares for
every 1000shares of BoB.
 The strategy which the government has adopted is merging one weak
bank with its stronger counterparts. In this case the weaker bank is
mumbai based Dena bank. All the 38listed banks accounted for gross
NPAs totalling over Rs 10.17lakh crore in the quarter ended March 2018.
Cleaning of the balance sheet and minimising NPAs is the objective of the
latest merger announced by the government. On may 12,2018 the
How vijaya bank reserve Bank of India asked the lender not to issue any fresh loans and
compensates for hire new pesonnel as part of its restrictions under prompt corrective
action.
Dena bank
inclusion in
merger with Bank
of Baroda
 ▪ In terms of the number of branches, Bank of Baroda
ranks second in india across all banks.
▪ The new merged Bank of Baroda has an advances and
deposits market share of 6.9%and 7.4%.
▪ After the merger, the number of public sector
banks(PSBs) has reduced to 19 from 21.
10 Things to ▪ The merger has also brought down the number of
banks kept Under the prompt corrective action (PCA)
know about the framework by the reserve Bank of india to four.

merger ▪ Based on third quartely results of Dena bank and Vijaya

Bank, key credit metrics of the merged entity, with the
expection of probability, will be broadly similar to that
of bank of baroda
▪ It has cautioned that branch profitability analysis
remains a focus area.
 ▪ To strengthenthe balance sheet of the merged
entity and meet its credit and Contingency
needsthe government has decided to infuse Rs
5042 crore into Bank of Baroda by way of
prefrential allotment of equity shares.
▪ Aacording to share swap ratio, shareholders will
receive 402equity shares of Bank of Baroda for
every 1000equity shares held by Vijaya Bank. For
To be every 1000 shares of Dena Bank held, investors
continued..... will receive 110equity shares of Bank of Baroda.
▪ According to market reports, cultural integration
of the three banks is likely to remain an overhang
on the banks near term performance.
▪ The new Bank of Baroda is expected to create a
globally competitive bank by taking the
advantages of economies of scale, synergies for
the network, low cost deposits and subsidiaries.
 ▪ New bank account numbers and customer IDs
could be assigned to the customers.
▪ Customers will have to update their banking
details with entities to incorporate the new
account number and IFSC codes.
▪ Customers might have to fill new instruction forms
What would to SIP and loan EMIs.
change ▪ New cheque books, passbooks, credit cards, debit
cards might be issued.
▪ Some branches might be closed after
consolidation.
 ▪ The interest rates for personal loans, home loan,
What will education loan, etc. Are not likely to change.

remain ▪ The interest paid to customers on fixed deposits

or recurring deposits is expected to remain
unchanged unchanged.
 ▪ Account holders
After merger the account holders will undergo
these changes :New account number, new cheque
book and ATM cardsalong with new user name for
assessing the debiting website of the amalgamated
Impact on entity. Most important, if you have provided ECS
mandate or given standing instructions for debiting
Account Holders, the account for services like an insurance premium,
Depositors and mutual fund SIP etc., they may have to be updated if
asked by banks.
Borrowers ▪ Depositors
Fixed deposits are contract and it is not possible for
banks to change the rate mid way. If you have
locked into an FD, you can continue till maturity on
the same rate of interest.
 ▪ Borrowers
Borrowers however may get ready for an early
change as per the agreement with the banks. For
loans linked to banks MCLR, the home loan is reset
after every 12 months. borrowers of Vijaya and Dena
To be bank on their reset date may have to follow BOB

continued.... MCLR and the markup and hence, accordingly, there

may be change in their EMIs.
 Bank of Baroda’s (BoB) first quarter financial
performance reinforces analysts view that its
merger with Dena Bank, and Vijaya Bank will not
only take time to consummate, but will also
incur huge integration and transition costs.For
instance, Edelweiss Securities estimated that the
bank will incur as much as Rs 5,400 crore
towards integration, but the first quarter already
Merger to incur saw that expense in excess of Rs 6,000 crore.
transition costs. “We had anticipated large transition cost of
about Rs 5,400 crore comprising higher credit,
people and integration of IT and processes
expenses.Our estimate was overshot in Q1 FY20
with about Rs 6,000 crore hit already
taken.Slipagges of Vijaya and Dena bank which
to soar at 7.8 percent and 4.4 percent
respectively .
 Government decided to merge one weaker lender Dena
bank and anchor lender Vijaya Bank with a 130 year old
Bank of Baroda. All these banks are different from each
other, have different buisness operations, hold different
positions and have different experiences. While there
won’t be material change in BOB considering it is the
acquirer, Customers of vijaya Bank and Dena Bank will see
changes in their way of carrying a financial transaction.
How bank Here are list of changes in bank accounts and in financial
accounts be transactions:

affected ▪ Loans
▪ Deposits
▪ Savings account& current account
▪ Branches
▪ Other details
 Government plan to expedite banking consolidation might
throw up many challenges which are likely to extend the
balance sheet Clean up for a couple of years. In integration
process, where there are challenges such as technology,
people, culture etc. But such a big merger also throws up
many challenges, which are likely to extend the balance
Challenges of sheet clean up for a couple of years.

Merger ▪ Creating clones

▪ Retail banking challenge
▪ High cost model
 After Bank of Baroda’s merger with Dena Bank and
Vijaya Bank, its shares have become a hot pick for
the investors. After the merger, the banks have a
network of close to 9500 branches and

Conclusion approximately 13000ATMs across India. BiB has

become second largest public sector Bank in the
country and third largest bank after State bank of
India and icici bank. Many experts are very
optimistic about this bank, and given a buy rating.
 ▪ AnandAdhikari 2019 merger of half dozen banks in offing? Here are
challenges that may come up may31 retrieved fromhttp://www.buisness
today. in/opinion/perspective/public-secto- of –baroda-dena bank –vijaya
bank/story/352520.html
▪ Sudish sharma, tanya sharma2019 why BoB merger with Denaand
Vijaya Bank is importantJanuary11retreivedfrom<http://www.buisness
today. in/opinion/columns/why-bob-merger-with-dena- bank and vijaya-
bank-is-important/story/309329.html

Refrences
▪ Nikhil Aggarwal 2019Dena bank, vijaya bank merger with
BOB:10things to knowyou April 1retreived fromh
ttps://www.google.com/amp/s/www.livemint.com/industry/banking/bank
-of-baroda-merger-vijaya-dena-sbi-hdfc-icici/amp-1554006701387.html
▪ Aseem Thapliyal 2018 How vijaya bank compensates for Dena bank
inclusion in merger with Bank of Baroda September 21 retrieved
from<https://m.businesstoday.in/lite/story/vijaya-bank-dena-bank-
inclusion-merger-bank-of-baroda/1/282704.html>