BoB, Dena, Vijaya Bank merger: Employees have nothing to fear

Vijaya Bank assured employees that the service conditions ‘will remain unaffected and staff benefits retained’

Illustration: Uttam Ghosh/Rediff.com

In an effort to soothe nervousness among employees, the managements of Bank of Baroda, Vijaya Bank and Dena Bank have assured that service conditions won’t be compromised after the merger.

In addition, all three public sector banks said business continues to remain as usual.

“In the current state, where the banking industry is fragmented with 21 public sector banks having limited differentiation, sub-optimal scale of operations and unhealthy competition for similar business, consolidation is inevitable,” Bank of Baroda’s top management, including managing director and chief executive officer P S Jayakumar, wrote to employees.

“We would also like to state that Barodians should not have any apprehension on the amalgamation, as service conditions will remain unaffected.

"The combined entity will offer more and diverse opportunities to employees since it will have a broader geographic footprint to operate in,” the letter read.

The amalgamation will increase Bank of Baroda’s reach in the south and Maharashtra, apart from cementing its leadership position in Gujarat.

“Each of the banks has its own strength and niche relationships that can be pooled in. We will leverage upon the same to build a stronger bank,” the Bank of Baroda management wrote.

Similarly, Vijaya Bank, including MD and CEO R A Sankara Narayanan, assured employees that the service conditions “will remain unaffected and staff benefits retained”.

The amalgamation will create a “gigantic entity with global presence,” Vijaya Bank wrote, adding, “With increase in business volumes and branch network, there is good scope for career progression.”

The Centre plans to merge the three banks to create the country’s third largest bank, after State Bank of India and HDFC Bank.

Dena Bank, headed by executive director Ramesh Singh, wrote that employees need not worry about their employment in future.

“The amalgamation will provide benefits in information technology, especially in digital banking services to Dena Bank customers,” it wrote.

Last week, Finance Minister Arun Jaitley and Financial Services Secretary Rajiv Kumar held a surprise press conference to announce that the government would want to merge these three banks.

Among the three, Dena Bank is a laggard. It is under the PCA framework and has net non-performing asset (NPA) ratio of 11.04 per cent. High bad debts have eroded the capital base of the bank, with the core equity ratio (CET1) at 8.15 per cent of the risk-weighted assets.

Vijaya Bank is one of the best performers among public sector banks, having net NPA ratio of 4.10 per cent, and a CET1 of 10.35 per cent.

BoB, the biggest of the three, has a steady profile, net NPA ratio at 5.40 per cent, and CET1 at 9.27 per cent.

The combined entity will have net NPA ratio of 5.71 per cent, and CET1 of 9.32 per cent.