Bank of Baroda, Vijaya Bank, Dena Bank merger: 4 BAD things that can happen to these banks

The bad loans of five associate banks of SBI as on March 31, 2017 were about Rs 65,000 crore and that of SBI Rs 112,000 crore -- that is a total of Rs 177,000 crore, he reportedly said, adding that after the merger, SBI's bad loans in 2018 increased to Rs 225,000 crore.

Notably, the number of PSU banks will come down to 19 after this merger. Image source: Reuters

Although the government decision to merge state-owned Bank of Baroda, Vijaya Bank and Dena Bank is aimed at creating the country's third largest lender, as part of efforts to revive credit and economic growth as well as give reforms a big boost, the move has elicited mixed, even negative, reactions.

A member of the All India Bank Employees Association (AIBEA) stated that miracles do not happen by merger of banks. The AIBEA General Secretary, CH Venkatachalam, told IANS, "Firstly, there is no evidence that merger of banks would strengthen the banks or make it more efficient." Venkatachalam gave the example of the State Bank of India last year merging with itself five of its subsidiary banks and taking over Bharatiya Mahila Bank.

He revealed 4 things that happen when banks are merged in this situation:

1. Result in higher bad loans (as it has happened in the case of State Bank of India).

2. Result in closure of branches

3. Result in reduction of staff

4. Result in reduction in business. Venkatachalam explained, "For the first time in 200 years, SBI has gone into loss."

The bad loans of five associate banks of SBI as on March 31, 2017 were about Rs 65,000 crore and that of SBI Rs 112,000 crore -- that is a total of Rs 177,000 crore, he reportedly said, adding that after the merger, SBI's bad loans in 2018 increased to Rs 225,000 crore.

Venkatachalam said the banking industry's bad loans as on March 31, 2018 stood at Rs 895,600 crore.

Notably, the number of PSU banks will come down to 19 after this merger.

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Meanwhile, Industry body Ficci yesterday termed the government's decision to merge three state-owned banks as a progressive move, and noted that it signifies the government's commitment to strengthen the banking sector.

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