BoB-Dena Bank-Vijaya Bank merger takes effect from 1st April : Here's what will change for customers of these banks


Two major state-run banks will stop operations from April 1. These two banks are Dena Bank and Vijaya Bank, and they will be merged with Bank of BarodaBank of Baroda will acquire Vijaya Bank and Dena Bank to create India’s second largest public sector bank behind State Bank of India (SBI) effective Monday. This is the first threeway merger of banks in India. The combined bank will have a geographical reach of more than 9,500 branches, more than 13,400 ATMs with 85,000 employees serving 120 million customers. 

The combined entity will have deposits and advances of Rs 8.75 lakh crore, and Rs 6.25 lakh crore, respectively. “The complementary branch presence will add to the network in western and southern states – Maharashtra, Gujarat, Kerala, Tamil Nadu, Karnataka and Andhra Pradesh. The bank will have a 22 per cent market share in Gujarat and an 8-10 per cent market share in Maharashtra, Karnataka, Rajasthan and Uttar Pradesh,” Bank of Baroda said. 

Dena Bank, which is under RBI watch under the so-called prompt corrective action framework, will have renewed access to credit facilities immediately. 

“Both banks will have access to BoB’s international presence at 101 offices. Unique programmes of Vijaya Bank like SRTO funding, plantation financing will be available to customers of the other two banks,” BoB said. 


Banking operations and accounts held by these two banks will be transferred to Bank of Baroda post merger. This would lead to some changes for the customers of Dena Bank and Vijaya Bank.

Since the banking operations of Dena Bank and Vijaya Bank will be handed over to Bank of Baroda (BoB), the customers may get new passbooks, cheque books, debit and credit cards, and even new account numbers and customer IDs. This means that the customers will have to get their banking details updated with entities like the Income Tax Department, mutual funds, insurance companies, etc.

Some aspects, like the interest rate on fixed deposits or recurring deposits, and existing loans, are not likely to change. Here's a look at how the merger of Dena Bank and Vijaya Bank with Bank of Baroda might affect their customers:

What could change
  1. New bank account numbers and customer IDs could be assigned to the customers.
  2. Customers will have to update their banking details with entities like the Income Tax Department, mutual funds, insurance companies, National Pension Scheme, etc, to incorporate the new account numbers and IFSC codes.
  3. Customers might have to fill new instruction forms for SIP and loan EMIs.
  4. New cheque books, passbooks, credit cards and debit cards might be issued.
  5. Some branches might be closed after consolidation. Customers of such branches are likely to be transferred to a different branch of Bank of Baroda.
What will remain unchanged
  1. The interest rates for personal loans, home loans, auto loan, education loan, etc are not likely to change.
  2. The interest paid to customers on fixed deposits or recurring deposits is expected to remain unchanged.
The Supreme Court of India has dismissed the petitions by several bank associations to stay the merger of Bank of Baroda, Dena Bank and Vijaya Bank, clearing the way for the amalgamation. Ahead of the merger, the government has decided to infuse Rs 5,042 crore into the Bank of Baroda by way of preferential allotment of equity shares of the bank during FY2018-19, as government's investment.

According to the Scheme of Amalgamation, shareholders of Vijaya Bank will get 402 equity shares of BoB for every 1,000 shares held. In the case of Dena Bank, its shareholders will get 110 shares for every 1,000 shares of BoB.

After the entity formed by the merger of BoB, Dena Bank and Vijaya Bank will be second the third biggest in the Indian banking sector, by virtue of assets and businesses.
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Bank of Baroda’s ‘one-sided’ contract riles Dena Bank, Vijaya Bank staff

With the merger of Dena Bank and Vijaya Bank with Bank of Baroda (BoB) coming into effect from April 1, the BoB management is reportedly forcing staff of the other two banks to sign an allegedly “one-sided” and “discriminatory” contract before March 16. Even as final negotiations regarding the wages are on, Dena Bank and Vijaya Bank employees have received a letter from BoB, asking them to sign the offer of employment or to opt for the Voluntary Retirement Scheme (VRS).


While the letter asked employees of both the banks to exercise either of the options before March 16, it did not specify the terms and conditions of employment. This would be decided later by the Board of Bank of Baroda, according to the letter. “You are hereby offered to hold office and service in Bank of Baroda, from the effective date i.e., April 1, 2019, on the terms and conditions as may be decided by the Board of Directors of Bank of Baroda,” said the offer letter, a copy of which is accessed by this publication.

The staff of both Dena Bank and Vijaya Bank called this “discriminatory”. “We were told that our interests will be protected, but the BoB is using indirect methods to force VRS on us. We cannot be forced into signing the consent letter without knowing the terms and conditions. As per the initial negotiation, our wages and promotional terms and conditions will not be at par with (that of) Bank of Baroda (staff), which is discriminatory,” a Vijaya Bank employee said told this paper. 

The employees are also bothered by the transfer policy. “There are many branches of Dena Bank and Bank of Baroda, which are overlapping. While the amalgamation process is still on, the staff fears mass transfer of Dena Bank employees. So, this is like blackmailing us into either working on unsaid terms and conditions or taking VRS,” said a Dena Bank employee.

Meanwhile, the banks’ union has already termed the whole process illegal. “The whole process of amalgamation is illegal, unethical and done in a hasty manner. There was no need for opting for Alternative Mechanism. And while the petition is already in the Supreme Court, they are forcing this contract on employees, just to show that employees are agreeing to the merger,” S Nagarajan, general secretary, All India Bank Officers’ Association said.


The All India Vijaya Bank Officers’ Union has said that the manner in which the merger is done is highly questionable. “This is totally pressure tactics and a highly questionable move. While those who are about to retire may opt for VRS, many young employees will go ahead and sign it to save their future jobs,” said K Srinivasarao, general secretary, All India Vijaya Bank Officers’ Union. The queries sent to Bank of Baroda by this correspondent remained unanswered.

A case in point
When merger of SBI came into effect, 4,000 employees at SBI and associates opted for VRS Till date, there is a difference in pay, perks and promotion policy that associate banks’ employees feel they are getting a step-motherly treatment, even in HR policy In July last year, 70,000 officers of the associate banks were asked to “return the compensation for extra work” during demonetisation
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Dena Bank narrows its loss in Q3FY19


State-owned Dena Bank on Thursday reported narrowing of net loss in December quarter to Rs 178.47 crore as provisioning for bad loans declined. The bank had posted a net loss of Rs 380 crore in the October-December period of 2017-18.

Total income of the bank also came down to Rs 2,293 crore in the quarter under review as against Rs 2,476 crore in the year-ago period, Dena Bank said in a regulatory filing.

The lender also improved its asset quality with net non-performing assets (NPAs) falling to 10.44 per cent of total advances at December-end 2018 from 11.52 per cent in year-ago same period.

Also read- Q3FY19 Results of all Public & Private Sector banks in India 

Gross NPAs however rose to 19.77 per cent of gross advances as against 19.56 per cent a year ago.


In absolute terms, net NPAs stood at Rs 6,142.47 crore by the end of third quarter 2018-19 as against Rs 7,564.20 crore a year ago.Gross NPAs stood at Rs 12,998.46 crore, down from Rs 14,168.78 crore a year ago.

The lender's provisioning for bad loans nearly halved to Rs 519.37 crore in the latest quarter from Rs 1,044.28 crore in October-December 2017. Provision coverage ratio stood at 66.60 per cent at December-end 2018.

The lender also informed that "the board of directors of Bank of Baroda, Vijaya Bank and Dena Bank at their respective meetings held on January 2, 2019, have approved the amalgamation of the three banks."


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Merger Of Dena Bank and Vijaya Bank With Bank of Baroda Challenged In Court

The proposed amalgamation of Bank of Baroda, Vijaya Bank and Dena Bank has seen a legal challenge with the Delhi High Court agreeing to hear a petition challenging the move, days after it was approved by the union cabinet.
The petition filed by the All India Bank Officers’ Confederation and the All India Vijaya Bank Officers’ Association has questioned the decision-making process behind the merger, calling it a “blatant circumvention and disregard for statutory procedures”. The petitioners argued that the step was taken under the direction of the government, accusing it of abuse of power as the majority shareholder.
While the law says that the scheme for amalgamation must be drawn by the government in consultations with the RBI, in this particular case it was sent to the board of the banks, the petitioners said. They claimed the decision taken by the boards of state-run banks is invalid due to the absence of directors on behalf of the employees, which is mandatory under the law.

The petitioners alleged there was lack of effective consultation with the RBI even as the government “repeatedly attempted to inaccurately describe” the events leading up to the decision of amalgamation. The decision to amalgamate, according to petitioners, was not a voluntary or an autonomous decision.
The union cabinet on Jan. 2, 2019 gave its approval for the merger. Addressing the media, Law Minister Ravi Shankar Prasad had said the merger will result in more lending powers to the merged entity, giving it a globally competitive identity.
The petitioners, however, questioned the economic reasoning behind the merger, calling it an irrational exercise by not considering the interests of various stakeholders such as the shareholders, employees and customers.
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What will happen to Employees, Bank Branches after merger of BoB,Dena and Vijaya Bank


The announcement of the merger of Bank of Baroda, Vijaya Bank, and Dena Bank has sent the fear of job loss to all the employees of the three banks. The shareholders were also confused. Recently, the banks have finalised their share-swap ratio. However, the employees have been protesting against the move. Minister of State for Finance Shiv Pratap Shukla in Rajya Sabha on Tuesday clarified about the rationalisation of staff and branches after the merger of the banks. In a written reply in the Upper House, Shukla stated that the government had approved a framework for proposals to amalgamate PSBs through an Alternative Mechanism (AM) with a view to facilitate consolidation among public sector banks to create strong and competitive banks.


After obtaining RBI inputs, the government has notified the scheme of amalgamation for Bank of Baroda, Vijaya Bank and Dena Bank. Shukla said that not even a single employee of any of the three banks will lose job.
"The scheme of amalgamation protects employee interests by providing that every serving employee of the amalgamating banks shall be an employee of the amalgamated bank and shall continue to work in accordance with Board-approved terms and conditions of service, and that the Board of the amalgamated bank shall ensure that the interests of all employees of the amalgamating banks are protected," said the minister.
Explaining the banks' turnaround plans, the minister said that out of the three aforesaid banks, turnaround plans were approved by the Board of Dena Bank in the second quarter of financial year 2017-18. 


The Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980 empowers the Central Government, in consultation with the Reserve Bank of India (RBI), to make a scheme, inter alia, for the amalgamation of any nationalised bank with any other nationalised bank or any other banking institution. 


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No one will lose job after Bank of Baroda merger: Arun Jaitley

Finance minister Arun Jaitley on Friday said in Lok Sabha that there would be no loss of jobs due to merger of public sector banks. Earlier this week, the Cabinet approved merger of Vijaya Bank and Dena Bank with Bank of Baroda. Jaitley said that there would be no job losses due to merger of the banks and that the move would create a bigger entity like the State Bank of India (SBI).
The cost of lending could also become cheaper, he added. During the Question Hour, the minister said that out of the 21 public sector banks, 11 are under PAC (Prompt Corrective Action) framework. PAC is initiated against banks that have high levels of non-performing assets (NPAs).
Replying to a supplementary question, Jaitley said the curve of non-performing assets would go down and that the Insolvency and Bankruptcy Code has helped in bringing back around Rs 3 lakh crore into the system.

Jaitley said that the State Bank of India (SBI) and other public sector banks have been making operational profits. They incurred losses due to provisioning for non-performing assets, he added.
With regard to recapitalisation of Public Sector Banks (PSBs), the minister said that Rs 51,533 crore has been infused into them in the current financial year till December 31.

“In the budget estimates of FY 2018-19, Rs 65,000 crore has been allocated for recapitalisation of PSBs and an amount of Rs 51,533 crore has been infused in PSBs till December 31, 2018,” he said.
The minister also said that in recent past, Rs 90,000 crore was allocated in the Union Budget and infused in various PSBs by the government during financial year 2017-18.
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Cabinet approves amalgamation of Dena Bank, Vijaya Bank with BoB


The Union Cabinet on Wednesday approved the first-ever three-way merger in the history of Indian banking with the amalgamation of state-owned Vijaya Bank, Dena Bank and Bank of Baroda (BoB)

"There will be no impact on the service conditions of the employees and there will be no retrenchment following the merger," Union law minister Ravi Shankar Prasad said. 

BoB also finalised the share swap ratio for merger of Vijaya Bank and Dena Bank with itself. 


As per the scheme of amalgamation, shareholders of Vijaya Bank will get 402 equity shares of BoB for every 1,000 shares held.


In case of Dena Bank, its shareholders will get 110 shares for every 1,000 shares of BoB.


The government in September last year had announced merger of Vijaya Bank and Dena Bank, with larger peer BoB. The merged bank will become the country's second largest public sector bank (after SBI) and will "help create a strong globally competitive bank", the government said in a statement.



The merger will come into force on April 1, the statement added.
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The challenges behind BoB, Vijaya Bank & Dena Bank merger


When an experiment begins, the scientist hardly knows what the outcome will be. In a moment of adventure or necessity, the government put three men — PS Jayakumar, RA Sankara Narayanan and Karnam Sekar — in a boat and set them on sail into uncharted territory. 


These men who head Bank of Baroda, Vijaya Bank and Dena Bank may face many a storm and choppy waters in a journey that could in a few years make them either look like Christopher Columbus who found the new world, or land in no man’s land like Robinson Crusoe. 

When the numbers are put out on an Excel sheet, the easiest way to analytical glory, the merged entity is the second-largest by assets. But life on the integration ground is the opposite of what appears on the Microsoft Excel file. Mergers are probably the most glamorous in the world of business, but history is as much about bitter divorces like Chrysler-Daimler as they are about romantic rides like Procter & Gamble’s with Gillette. 

As with most marriage proposals, there’s optimism about this too. “I look at the merger positively,” says Aditya Puri, chief executive officer of HDFC Bank, the most valuable lender. “I think it will lead to cost, product and technology efficiencies. It is easier to manage.” 


MAMMOTH TASK
The task at hand for the three men is of monstrous proposition. In any merger, the biggest challenge is that of personnel. While in the private sector, the easiest action for the management is to lay off people to derive cost savings, that option does not exist for the three CEOs. There are 90,000 staff whose future has to be protected and concerns addressed.



“There are three top reasons for the failure of any merger, one of them is the way HR gets integrated,” says PS Jayakumar, CEO of Bank of Baroda, the biggest of the three. “We are very conscious of this. But there are some commonalities as well… like interview processes are similar, owner is similar, organisation structure is the same kind, so there are a lot of things that are common as well.” 

There are multiple data centres that handle more than 10 crore customers across three banks that need to converge. For the moment, the three banks operate on three different technology platforms which appear to be easy to integrate but difficult to execute. “Technology integration in theory is easy to achieve but in practice it will require a lot of hard work like just getting a new account code for all customers and communicating that will not be a simple thing,” says Jayakumar. 

“Replacement of cheque books will not be simple. RTGS, NEFT details and net banking interface will take time to change.” The merged entity will have about 9,489 domestic branches which looks like a great leap forward, but of this nearly 10%, or 941, branches are in the same pin code, which needs to be reduced without much staff resentment. 


THE SYNERGIES
One of oddities of Indian banking was a single owner, the government, dominated nearly 80% of the industry which is near monopoly, but the problem was it was spread over 21 different entities that neutralised the advantages, the dominance would have brought it. “Why do you need so many banks with the same parentage competing against each other, killing each other in terms of under cutting etc.?’’ says Ravneet Gill, CEO, Deutsche Bank, India. 

Because of the single owner, the incentive for different entities to compete strongly and innovate did not exist either. Whatever each bank achieved, it was more an enterprise of individuals rather than any institutional vision. While the mixture of personnel with different cultures from Dena, Vijaya and Baroda could cause some friction, the advantages that would flow are many. 

“It will give them more job opportunities so that there is no shortage,” says HDFC Bank’s Puri. “Given the retirement that is coming, there is going to be a shortage of manpower. If you merge these three, then you don’t have to have layoffs and it automatically brings in cost efficiency.” Handling of staff would determine whether they become an asset or a liability, but the existence of so many overlapping branches like BoB’s first Mumbai branch in Horniman Circle, a century old, that sits opposite sprawling Dena’s. 

These could be merged and allocate excess staff to suburbs, probably closer home. In Maharashtra alone, the merged entity’s branch network would rise by 400 to 950. Cost-cutting could be huge. In fact, BoB has already proven by reducing the number of auditors to just about 30 from nearly 1,400. In the merged entity, the procurement of technology, telecommunication could bring down costs. 


“We just need to ensure these synergies get captured,” says Jayakumar. “We have to have a clear plan on how to do it but also some patience. There may be short-term pain but the long-term gains will not take far long to manifest themselves.” State Bank of India’s merger of five associates with itself and ING Vysya’s merger with Kotak Mahindra Bank are recent examples that these three could draw from. 

While the size of integration of SBI associates was mammoth — almost merging ICICI Bank with SBI — the combination of ING Vysya with Kotak shows the challenges. A top Kotak executive involved with the integration then, Mohan Shenoi described the process best. “The merger process, according to me, was like servicing and upgrading an aircraft while it is flying,” Shenoi told ET in an interview last year. “So, we had to ensure that business as usual should go on, not on one side but on both sides.” 

Kotak faced issues of staff integration and had to create a bad bank to dispose off the defaulted loans. It also had to take a knock on pension provisions. 

DIFFERENT STROKES
It is a merger of banks from the same stable, but there are strengths and weaknesses that would play out and complicate as well. “A lot is riding on the success of this merger because a failure will mean that this whole consolidation process will be put on the back burner,” said Gopal Jain, managing partner at private equity fund Gaja Capital, which was one of the earliest backers of RBL Bank. 

Over the past three years, Jayakumar along with former chairman Ravi Venkatesan had initiated a lot of changes, including lateral hire, changes to human resources policies that prioritise merit. Its leadership programme focused on enabling technology absorption along with refurbishment of branches into paperless offices and ending the steel cupboard culture are a welcome relief to both staff and customers. 

“BoB has gone through a transformation,” says Vikramaditya Singh Khichi, executive director at BoB and a former Dena Bank executive. “The systems and procedures have been set to lay out a path going forward. This integration part is now going to move in only the direction BoB is moving.” Vijaya and Dena are small and saddled with bad loans, but they come with strengths too. Vijaya is retail focused and profitable and was the only state-run bank that paid dividends last fiscal. 


Dena though in Prompt Corrective Action with restricted lending, has a portfolio of small and medium enterprises that could be coveted. “Bank of Baroda will remain on course with the strategy set in the last three years… it’s working well and we have to do more to accomplish the goal,” says Jayakumar. “As we get our programmes together, there will be good success- transfer opportunities so that we will end up with an institution that is more than the sum of its parts.” The government’s experiment has just begun. 

Source - Economic Times
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BoB, Dena, Vijaya to decide on organizational structure of merger in next week



Chief executives of Bank of Baroda, Vijaya Bank and Dena Bank will meet next week to discuss a plan to increase the number of organizational layers in the entity resulting from their merger, said a senior banker aware of the talks. This, he said, will be done to accommodate the larger workforce of the merged bank. The three banks put together have 85,675 employees, 9,489 branches and generate a total business of ₹14.8 trillion.
One of the proposals to be discussed is to change the current two-tier structure of Dena Bank and Vijaya Bank to a three-tier structure of Bank of Baroda or even to a four-tier set-up that the State Bank of India (SBI) has, the banker said on condition of anonymity.
The banker explained that while Dena Bank and Vijaya Bank have a two-tier set-up of zonal offices and a head office, Bank of Baroda has regional offices, zonal offices and a head office. SBI has regional offices, zonal offices, local head offices and a corporate centre of its head office—a four-tier structure.

“We are weighing the pros and cons of this structure and while a leaner set-up accelerates decision-making, a more elaborate set-up will help an organization the size of the merged bank,” he said.
The person added that a central steering committee has been formedand it comprises three CEOs and the executive directors of the three banks. Fourteen functional groups have been formed, comprising general managers. Some of the functional groups include human resources, information technology, stressed assets, corporate advances and retail advances.
According to the person cited above, the banks plan to retain only one head office of the three they have currently, but plan to distribute some departments among the three of them. “The merged bank will not be able to retain all the regional offices as well and employees working there will be transferred to other locations. However, at present, there is no plan for a voluntary retirement scheme,” he added.

In September, the government decided to merge three banks it owns—Bank of Baroda, Dena Bank and Vijaya Bank—in a move expected to reduce the amount of capital it needs to pump into these lenders. 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 and HDFC Bank. The bank merger will take 4-6 months to complete, BoB CEO P.S. Jayakumar had said on 17 September.
This is the third major restructuring in the public sector banking space undertaken by this government. The first was the merger of the five associate banks of SBI with itself. The merger had resulted in a sharp jump in the combined entity’s bad loans portfolio, crimping its profit. The associate banks reported a loss of ₹5,792 crore for the March quarter of 2016-17 and ₹10,243 crore for the entire year. This resulted in the consolidated net profit of SBI going down to a ₹241 crore when the stand-alone net profit was ₹10,484 crore.
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4 PSU banks put up NPAs worth over Rs 7,500cr for sale


At least four large public sector banks have put up nearly Rs 7,500 crore worth of non-performing assets (NPAs) on sale to asset reconstruction companies (ARCs) and other financial institutions.

Lenders including State Bank of India (SBI), Bank of BarodaDena Bank and Andhra Bank have decided to sell a large part of their NPA exposures to accounts which are undergoing resolutions at various insolvency courts.

“We expect to recover a large part of these assets on a cash basis. This also helps us avoid delays in resolution due to the excessive litigation,” said the head of a large public sector bank.

On November 20, Bank of Baroda listed 35 bad loan accounts worth Rs 4,237 crore for sale on its website. These include: Jindal India Thermal Power (Rs 334.93 crore), Rathi Steel & Power (Rs 290.52 crore) and Rolta India (Rs 287.38 crore).


“The interested ARCs/ banks/ NBFCs/FIs can conduct due diligence of these assets with immediate effect after submitting expression of interest and executing a non-disclosure agreement with the Bank,” BoB said on its website.

Similarly, state-owned Andhra Bank has invited bids for the proposed sale of its NPAs comprising 53 accounts, with a principal balance of Rs 1,552.96 crore on a cash basis only. The e-bidding will take place on December 3. The bank will execute the assignment agreements and fund transfer on or before December 10.

Another government-owned lender Dena Bank proposed sale of 84 NPAs, with an outstanding exposure of Rs 3,324 crore, to be sold through an e-bidding process on November 29. The country’s largest lender SBI had also put up 11 bad loan accounts for sale to ARCs and financial companies to recover dues worth nearly Rs 1,019 crore.

Price still pinches
“Banks are putting up many distressed assets on sale, but pricing continues to be an issue. However, with more cash deals and push for a clean-up from the regulator has helped us garner a better price. They (banks) also want to avoid the NCLT (National Company Law Tribunal) after the Reserve Bank of India’s (RBI) February 12 circular. Hence, they are putting up more assets on sale,” said a chief of a large ARC.

The circular mandates all lenders to push all borrower accounts for resolution under the Insolvency & Bankruptcy Code (IBC) if a successful recovery has not been made within 180 days of the loan turning into an NPA.

Banks and ARCs have been negotiating hard over the past several years. Given the rush to recover loans and increasing supply of bad loans, banks are willing to take more hair-cuts or losses on its loans than before for immediate cash recovery.


Asset Reconstruction Company (India), or Arcil, one of the country's largest ARCs, plans to buy about Rs 5,400 crore worth of stressed assets from banks. For this, it plans to raise additional Rs 1,500 crore in the next six months.

In FY18, Arcil acquired about Rs 2,700 crore worth of assets, while the same for the industry stood at over Rs 20,000 crore, said Pramod Gupta, Arcil’s Chief Financial Officer (CFO).

With a clear focus on retail and mid-sized distressed assets, Arcil's CEO and Managing Director Vinayak Bahuguna said his firm is selectively looking at some of the industrial assets too. “In the mid-sized segment, we are looking at companies with debt up to Rs 5,000 crore. We are looking at steel, textile and road projects and some select stressed power projects.”

In Q2, Bank of India had put up a total of Rs 10,000 crore worth of NPAs on sale through auction. The bank’s CEO and MD Dinabandhu Mohapatra said the management is negotiating resolutions for power assets worth Rs 3,000 crore. Till March, cumulative estimates suggest that about one-third of the bad loans of banks have been purchased by ARCs.

As on September, banks are sitting on a huge pile of NPAs worth over Rs 10.50 lakh crore on its balance sheets, creating an opportunity for ARCs and domestic and foreign investors.

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Dena Bank Q2 loss widens on higher provisions, asset quality weakens


Public sector lender Dena Bank's second quarter loss widened to Rs 416.70 crore on elevated provisions YoY, with weakening asset quality sequentially.

The bank had reported loss at Rs 185.02 crore for September quarter 2017 and Rs 721.71 crore in June quarter.


Net interest income during the quarter grew by 20.8 percent to Rs 725.6 crore compared to Rs 600.67 crore in same period last year.

Asset quality of the bank weakened further in quarter ended September 2018. Gross non-performing assets (NPA) as a percentage of gross advances were higher at 23.64 percent against 22.69 percent in June quarter and net NPA increased to 11.70 percent against 11.04 percent QoQ.

In absolute terms, gross advances as well as net advances in Q2 were higher by 1.73 percent and 2.95 percent quarter-on-quarter to Rs 16,140.4 crore and Rs 6,902.4 crore respectively.


Provisions and contingencies dropped 22.4 percent sequentially to Rs 867.8 crore during the quarter ended September 2018, but were higher by 17.82 percent compared to year-ago.

Other income (non-interest income) fell 7.6 percent year-on-year to Rs 357.3 crore but operating profit increased 11.2 percent to Rs 442 crore in Q2FY19.

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BoB-Dena-Vijaya Merged Bank to get growth capital


The government will provide an additional capital cushion to the proposed merged bank to be formed by amalgamation of Bank of Baroda, Dena Bank and Vijaya Bank to start the new bank on a stronger footing, a senior government official told ET. 

“We will like to have a cushion of at least 50-100 basis points above the existing regulatory capital requirements. The bank will be provided with that growth capital,” he added. The actual capital infusion requirement in money terms will be available only after financials of the July-September quarter are available. 


In September, the government had proposed a merger of the three banks to create the country’s third biggest lender.Capital adequacy ratio (CAR) will reach 11.5% in 2019 under Basel III norms, and according to government data, the proposed combined entity had CAR of 12.25% by the end of June 2018. 

“This may be further impacted as these banks finish their due diligence and make provisioning for other requirements. If we want the combined entity to have a credit growth of 15%, we will need growth capital,” the official quoted earlier, said. 

The amalgamation will be the first three-way consolidation of banks in India, with a combined business of Rs 14.82 lakh crore. The government expects synergies to lead to larger distribution network and more business for the new lender. The government has started the exercise to look at capital requirements of all PSBs and has been holding meetings with their top deck. 

“We may have to give some support to Dena Bank in this fiscal if it falls short of regulatory requirements. For now, the other two lenders look good in terms of provisioning requirements,” said a finance ministry official. 


Last year, the government had announced a Rs 2.1 lakh crore bank recap plan of which Rs 1.35 lakh crore was to be given through re-capitalisation bonds, and the balance Rs 58,000 crore was to be raised from the market by the banks. 

So far, the government has infused Rs 70,000 crore through recap bonds, and the balance Rs 65,000 crore will be given in this fiscal. In July 2018, Rs 11,336 crore was infused in five PSBs to help them maintain regulatory norms. 

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BoB, Vijaya Bank, Dena Bank set up panels to merge operations

Bank of Baroda (BoB), Dena Bank and Vijaya Bank have decided to set up internal committees, which will help integrate their functions before the merger happens, said a person familiar with the development. In a meeting on Wednesday, the bankers also decided to appoint three separate valuers to arrive at share swap ratios, the person said, adding that the valuer appointed by one bank will also evaluate the other two banks, before a common ratio is arrived at and sent to the government. This was the second meeting after the merger announcement.

The committees will comprise the chief executive officers (CEOs) and executive directors of the three banks. “We have decided to form a few internal committees to integrate functions in the three banks. They include committees on credit, human resources (HR) and information technology (IT),” the person said, requesting anonymity.
Mint had reported on 3 October that although the three banks use the Finacle core banking solution developed by Infosys Ltd, they have different versions of the software. While Dena Bank and Vijaya Bank are on Finacle 7.2, Bank of Baroda had recently upgraded to Finacle 10.2.
On 10 September, the government had proposed the merger of the three state-owned banks. 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 and HDFC Bank Ltd, with a total business of ₹14.82 trillion.
Following the merger announcement, the managements had assured the staff that the government has decided to retain the banks’ individual identities even after the bank merger.
Analysts were wary of the human resource complications. A research report by Kunal Shah of Edelweiss Securities said challenges on human resources, process integration, branch rationalization and management bandwidth, will pose integration risks. “Roadblocks, for example, due to agitation from employees cannot be ruled out.”

A Kotak Institutional Equities note said that the merged entity will have 2,205 branches in western India, while the south and north will have 846 and 713 branches, respectively.
This is the third major restructuring in the public sector banking space by the government. The first was the merger of the five associate banks of SBI with itself. The merger had resulted in a sharp jump in the combined entity’s bad loans portfolio, crimping its profit. The associate banks made a loss of ₹5,792 crore for the March quarter of 2016-17 and ₹10,243 crore for the entire year. This resulted in the consolidated net profit of SBI going down to a mere ₹241 crore, while the stand-alone net profit was ₹10,484 crore.
Source - Livemint
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Reducing NPAs is Dena Bank’s first priority, says CEO

Reducing NPAs is Dena Bank’s first priority,The second priority is the tripartite merger with Bank of Baroda and Vijaya Bank and the third priority is improvement in CASA component, Karnam Sekar, MD & CEO, Dena Bank.


What would be your key focus areas over next one year?

Dena Bank is one of the 11 banks under prompt corrective action (PCA) list. We are in a very bad shape actually with respect to non-performing assets. We have a huge pileup of NPAs, both in the corporate sector and the retail sectors. That would be the first priority. The second priority is merger with Bank of Baroda and Dena Bank and improving the profitability by cutting down the overall cost of funds would be my second priority. We are in number three position as far as CASA percentage is concerned. A further improvement of CASA component in the overall deposit portfolio would be my third priority. 


The first priority continues to be containing the NPAs and do as much recovery as possible and control the credit cost because the bank is in deep trouble and incurring loss only because of this huge credit cost. Corporate credit is contributing significantly to our troubles but fortunately because of the NCLT cases which are being handled in the last 12 months, we are seeing some good progress there. If we are able to recover some of the corporate credit NPAs, then we will come out of this problem. 

Of course, second priority, apart from this business deals would be the amalgamation of Bank of Baroda, Dena Bank and Vijaya Bank to form a fourth entity which would be the second largest public sector bank after State Bank of India. So that would be the second priority. Further, the Dena Bank board has passed a resolution last Monday. 

We will wait for the other banks too to pass the board resolutions respectively and after that we will chalk out a common plan. Maybe, we will form a coordinating committee of all these three banks and then set milestones -- what should we do going forward and how to harmonise HR, how to harmonise the systems and procedures, how to harmonise the product portfolio, how to harmonise the credit processes and how to harmonise the IT infrastructure as well. 

So harmonising these three -- IT, HR and the systems and procedures and product portfolio -- also would be our priority. The coordination committee of all the three bankers would take care of this. We have a timeline when that will be done and we will stick to the timeline that is being stipulated now. Maybe in the next two, three quarters we will try and complete the whole process of amalgamation. 

This would be unique amalgamation because three different banks are coming together and unlike State Bank of India associates where there were some similarities, here it will be three totally different banks and all three have to amalgamate and form a fourth body. That will be a unique experiment. Once this is done successfully, maybe the Government of India will think of some more. 

This consolidation was started in 2017. All the bank boards have given their view on this consolidation process and as a culmination of that, only last week we passed the board resolution and communicated to the government also. 

Could you give us a timeline for the merger to be completed?

We will get some clarity only after all three banks sit together. The first stage would be to pass the resolutions. The board has to approve the initial process. Our board has already approved and on 29th September, Vijaya Bank is meeting and in due course Bank of Baroda board will also meet. If all three boards approve this initial process, then we will sit together, form a committee and arrive at the correct timelines. 

Could you quantify the total stressed assets on the books and how much resolution do you see over FY19?

Out of almost total assets of around Rs 90,000 crore, both stressed NPAs and partially written off accounts account for Rs 19,000 crore. Out of Rs 19,000 crore, at least Rs 5000 crore will be resolved by March 2019. That means 25% of the existing portfolio would come down. That is our target for March 2019. So Rs 19,000 crore would come down to around Rs 14,500-15,000 crore. That is my estimate for the year FY19. 

Where would slippages stand and what would be the level of recoveries?


On repayment also, we are making progress in the retail slippages. We have stopped further slippages, The entire corporate credit has been recognised and there is no further slippage. As a PCA bank, we are not doing any further lending. 

What kind of capital infusion do you expect from the government?

The finance minister has been assuring that whatever capital is required for the regulatory compliance will be given. As a PCA bank, we are not growing much and so growth capital is not being discussed. But whatever is the regulatory capital requirement, we have been assured will be met by the government. 

Source- ET Now
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