The Government of India has approved the merger of state-owned lenders Vijaya Bank and Dena Bank with Bank of Baroda.

The amalgamation, first announced in September last year, is the first three-way consolidation of banks in India. It will create the second largest public sector bank in the country supporting economies of scale and help to realise wide-ranging synergies.

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Vijaya-Dena- Bank of Baroda merger details:

The merger, set to be effective from 1 April this year, has already been approved by the respective boards of the three banks.

According to the scheme of amalgamation, Bank of Baroda will be the transferee bank and Vijaya Bank and Dena Bank as the transferor banks.

All undertakings of the two transferor banks including liabilities will be transferred to the Bank of Baroda.

The shareholders of the Vijaya Bank and Dena Bank will receive Bank of Baroda shares, under an agreed share exchange ratio.

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In a statement, the government said that the merger will result into no job redundancies. All employees will migrate into the combined entity in their same respective positions.

Benefits of the merger:

The three-way merger is expected to help the combined lender to support the credit requirements of the country. The merged entity will also be better equipped to absorb market shocks.

Additionally, it will enable to the merged entity to leverage the individual strengths of the three banks and support financial inclusion with a better distribution and branch network.

The amalgamation is a part of the government’s efforts to consolidate and revitalise the banking sector struggling with staggering NPAs.

Last year, the government merged State Bank of India with its five associate units.