The union government agreed with the merger on Jan 2, 2019. Union Minister Ravi Shankar Prasad says the merger will allow the combined entity under Bank of Baroda being the leading power. This means that BOB will be the transferee bank and Dena bank and Vijaya Bank will be the transferor bank. After the merger BOB will be the third largest bank in India in terms of Assets after SBI and HDFC Bank. The merger will be completed by 1st April 2019. And after the Merger BOB will be the second largest public sector bank in India.

Merged Entity

The total business will rise  from Rs. 10.3 trillion to Rs 14.8 trillion. The deposits will rise from Rs. 5.8 trillion to 8.4 trillion. The NPA will increase from 5.4% to 5.7% because as of now, the net NPAs with Dena bank is 11%.The financial of BOB will be diluted during the initial phrase of merger, mainly because of the bad loans of Dena Bank. Also, technology change, possible NPA (non-performing asset) provisions requirements etc. are likely to take a toll on near-term earnings of BoB” said Lalitabh Shrivastawa, assistant vice-president at Sharekhan. There is no retrenchment of any employee in the merged entity. But there are chances that some of the branches can be closed because of multiple presence in key locations.


All the employees of Dena bank and Vijaya Bank will come under BOB. There will be no change in their services or working conditions. This merger will help to create a strong, global competitive bank with Economies of scale and enable realisation of wide ranging synergies. Because of enhance range of services, general public as a whole will be benefited. The government hopes that the economies of scale and wider scope would position the merged entity for “improved profitability, wider product offerings, and adoption of technology and best practices across amalgamating entities for cost efficiency and improved risk management, and financial inclusion through wider reach.”

Swap Ratio

The swap ratio has been finalised for both Dena bank and Vijaya Bank. According to the scheme of Amalgamation, the shareholder of Vijaya Bank will get 402 equity shares of BOB for every 1000 shares and in case of Dena Bank, people will get 110 shares for every 1000 shares. The swap ratio seems to be in favour of BOB. As according to the closing price as of 2nd January 2019, the ratio is 27% sharp discount for Dena Bank and for Vijaya Bank, it is at 6% discount.


The three banks have strengths of their own, which will help the merged entity. Dena Bank has relatively higher access to low cost current and savings accounts (CASA), Vijaya Bank is profitable and is well capitalized and BoB has extensive and global network, as well as good product offerings.

The amalgamated banks will have access to a wider talent pool and will have a large database that may be leveraged through analytics for competitive advantage in a rapidly digitalising banking context. There will be a flow of benefits because of wider reach and distribution network and there will be reduction in distribution costs for the products and services through subsidiaries.

Apoorva Goenka
Team Leader- Equity Research & Valuation
(MSc Finance, NMIMS Mumbai. Batch 2018-20)

Connect with Apoorva on LinkedIn

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s