WHAT HAS HAPPENED?
- The Union Cabinet has approved the scheme of amalgamation for amalgamating Bank of Baroda, Vijaya Bank and Dena Bank, with Bank of Baroda as the transferee bank and Vijaya Bank and Dena Bank as transferor banks.
- The amalgamation will be the first-ever three-way consolidation of banks in India, with the amalgamated bank being India’s second largest Public Sector Bank.
WHAT ARE SOME OF THE LESSONS?
- Vijaya Bank and Dena Bank are transferor banks and BoB is transferee bank.
- 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.
SOME OF THE STRENGTHS OF AMALGAMATION- IMP FOR PRE & MAINS
- 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.
- Economies of scale and wider scope would position it for improved profitability, wider product offerings, and adoption of technology and best practices across amalgamating entities for cost efficiency and improved risk management, and financial inclusion through wider reach.
- It would also enable creation of a bank with scale comparable to global banks and capable of competing effectively in India and globally.
- Better market reach, operational efficiencies and the ability to support a wider offering of product and services.
- 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.
- 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.