“A merger of this size (between Bank of Baroda, Vijaya Bank and Dena Bank) may take at least a year to complete but I would not be surprised if the government announces the next such move in quick succession,” Axis Bank executive director Rajiv Anand said. “The intent of the government is to create a healthy public sector banking system which is imperative for country’s economic growth.”
As many as 11 banks have been placed under RBI’s prompt corrective measures for their high sticky loans and erosion of capital. Weak banks with lower capital are incapable of grow their loan book and support the economy.
The government’s Monday announcement signaled that this alternative approach may be tried out in the future too as a step to address the weakness in the banking system which is saddled with nearly Rs 9 lakh crore of bad loans.
Allahabad Bank reported Rs 4,674 crore net loss for FY18 with the ratio of gross non-performing assets being at 15.96%. Uco Bank had the annual loss at Rs 4,436 crore with almost a quarter of its loans turning NPAs. United Bank of India, the smallest of these group, had Rs 1,454 crore net loss with gross NPA ratio at 24.10%.
The grapevine was working overtime Tuesday, and Uco Bank was at the centre of the speculative talk. Many in the market believe that the stressed lender could be merged with banks in the South.
At UBI, the talk is that the lender may be able to retain its independent identity, and would be spared the consolidation dose. “We have sensed from general discussions with the ministry that UBI may be kept as it is given its regional nature, with the vast outreach in the east and north east. No other bank enjoys such a reach,” a senior official said.
Earlier, Punjab National Bank’s name was doing the rounds as the likely candidate to take over UBI.