BoB-Dena-Vijaya Bank merger: What it means for their customers

The combined entity is set to be the third largest bank in India, behind State Bank of India and ICICI Bank.
Somesh Jha & Abhijit Lele report.

Illustration: Uttam Ghosh/Rediff.com

The brand names of the three public sector banks (PSBs) - Bank of Baroda, Dena Bank and Vijaya Bank - that are set to be merged may be kept intact as the government draws closer to frame an amalgamation scheme.

One of the ideas that has gathered pace is that the names of Dena Bank and Vijaya Bank will be retained when one visits their ATMs or branches, officials, who were part of the deliberations, told Business Standard.

However, they will be brought under the Bank of Baroda group and this will be written on top of the two banks’ names, thereby retaining the identity of each bank under an umbrella group.

“Bank of Baroda is the biggest bank among the three and has a formidable international presence.

"Its name will be added on the top of the other two banks, while ensuring that the identity of the other two banks is also not lost when customers visit the branches,” said a senior executive of one of the banks.

A top executive with the other bank confirmed bringing Dena Bank and Vijaya Bank under the umbrella of Bank of Baroda group is being actively discussed as the aim is to retain the brand identity.

“All three bank managements are clear that they have to bring the best to the table.

"The respective bank customer should continue to feel a familiar environment and get benefits from integration,” the executive added.

At the time of announcing the merger in September, Finance Minister Arun Jaitley said the regional identity of the three banks will continue to expand.

Financial Services Secretary Rajiv Kumar had said the “brand equity” of the banks will be preserved, while protecting the employees’ interest.

Bank of Baroda’s total business size of Rs 10.4 trillion compared to Rs 2.96 trillion of Vijaya Bank and Rs 1.7 trillion of Dena Bank by the end of September 2018.

Bank of Baroda’s international business stood at Rs 2.2 trillion with 103 offices across 22 countries, whereas Dena Bank and Vijaya Bank have no global presence.

The combined entity is set to be the third largest bank in India, behind State Bank of India and ICICI Bank.

A senior finance ministry official said the Reserve Bank of India (RBI) has sent its comments to the Union government on the merger and the proposal will now be forwarded to a group of ministers headed by Finance Minister Arun Jaitley, known as alternative mechanism, for final approval.

The finance ministry will frame the scheme of amalgamation, seek the Union Cabinet’s nod and place it before Parliament soon.

A nod from lawmakers in Parliament is not required.

Bank of Baroda managing director and chief executive officer P S Jayakumar spoke at length on the merger and its challenges at the Business Standard Annual Banking Forum 2018 held in Mumbai on December 6.

“There isn’t any closure on that (name). That’s for the government to decide in the amalgamation scheme. But there is a difference between name and brand of the company.

"It is entirely possible to have multiple names under the same brand. There is opportunity to be creative,” Jayakumar said during the event.

Stressing that re-branding a bank during merger is a “contentious issue”, he cited global examples to point out how when Royal Bank of Scotland acquired NatWest Bank in 2000 (which was three times the former’s size), the latter’s name was retained.

However, after US-based Citigroup acquired Banamex Financial Group in Mexico in 2001, it came to be known as Citibanamex, he said.

Jayakumar said there is a 15 per cent overlap of over 9,000 branches of the three PSBs - areas with more than one branch as another bank.

He said the challenges to a merger include human resources, work culture, technology, central business purpose “and surprises that come from audit and forensics”.

But there were common thread to the merger of the three banks.

“The ethos and compensation structure is nearly homogeneous when it comes to the HR.

"If you look at technology, we are at (Finacle) 10.x and they were planning to move to it from 7.x. We can handle that part,” he said.

The Bank of Baroda chief said about 3,000 workers - roughly 3.5 per cent of over 85,000 employees - of all the three banks retire every year.

“Re-scaling can be managed as there is natural attrition and retirement,” Jayakumar said.