New Delhi: Months after a decision to merge state-owned Vijaya Bank, Dena Bank and Bank of Baroda into one entity was taken by the government, the banks have set December 15 as the deadline to agree to a preliminary share swap ratio for the combined entity, said Sankara Narayanan, managing director and chief executive officer, Vijaya Bank.
The proposal to merge three state-owned banks to form one entity in the country was finalised and approved by the government in September. The merged entity, comprising two relatively stronger banks and a weak one, will be the third largest lender in India, after State Bank of India (SBI) and HDFC Bank Ltd, with a total business of Rs 14.82 trillion.
EY has been appointed to take care of the financial and tax due diligence of all three banks. Alongside it, independent valuations will be carried out by these banks separately. Vijaya Bank has appointed MM Nissim and Co, Bank of Baroda has named Deloitte, and Dena Bank has appointed SMSR and Co LLP.
After the banks finalise the share swap ratio, it will be subject to the approvals of the respective boards, Reserve Bank of India and the Parliament.
McKinsey has also been roped in to chart the business plan for the combined entity over the next 5 years, said Narayanan. Under the plan, the entity expects to achieve 0.8 percent return on assets and 12 percent return on equity once the business stabilises, he added.
While the total staff strength will be retained at 85,000, a total of 200 branches will be shut, to leave a network of 9,500 branches. The managing directors are likely to retain their positions in the new entity.
“This will be an amalgamation at par and the seniority levels will be maintained,” said Narayanan. “There will be 3 managing directors with an executive chairman at the helm, which is similar to the SBI structure.”