State-owned Bank of Baroda (BoB), which has become the country’s second-largest bank by merging Vijaya Bank and Dena Bank, is likely to complete the entire process of the merger in two years.
BoB’s merger with Dena Bank and Vijaya Bank became effective from 1 April. A senior official of the bank said the Information technology platform integration alone will take about 12 months and other processes and systems may take another year or so.
The process has been designed to ensure that there is minimum disruption of the customers during the transition period, the official said adding that the branding of the three entities will be retained in the interim period and will be transitioned to the new brand in a phased manner to ensure minimum disruption to existing operations.
As far as capital is concerned, the official said, the government has infused Rs 5,042 crore in the bank taking care of additional expenses and maintaining minimum regulatory capital requirement. There would be pressure on the bank’s balance sheet during the first quarter when the maximum impact of the merger will play out and, subsequently, the impact will moderate, the official added.
The maiden three-way amalgamation is the first step in the consolidation of the public sector banking industry recommended in 1991 by the Narasimham Committee report. Through this merger, the government has created an institution of global scale and size, thereby providing significant benefit to all stakeholders.
The consolidated entity started the operation with a business mix of over Rs 15 lakh crore on the balance sheet, with deposits and advances of Rs 8.75 lakh crore and Rs 6.25 lakh crore, respectively.
BoB, the second-largest public sector lender after State Bank of India, now has over 9,500 branches, 13,400 ATMs, and 85,000 employees to serve 12 crore customers. The announcement of the three-way merger was among several reforms initiatives undertaken by Financial Services Secretary Rajiv Kumar to make public sector banks (PSBs) healthy, robust and globally competitive.
Following the merger, the number of PSBs has come down to 18.
Board performance evaluation
Bank of Baroda has invited bids from consultancy firms to evaluate the performance of its board. The bank said the outcome of the review would help to enhance its board’s overall effectiveness through improved dynamics and strengthened processes.
Consultancy firms have been asked to submit proposals by 2 May for “Review of Board Evaluation”, Bank of Baroda said in a request for proposal document. “Bank of Baroda has decided to engage a consultancy firm to conduct an independent review of the overall evaluation and effectiveness of the bank’s board. The review would provide an opportunity to align and prioritise the board’s focus on critical issues,’ said a statement from the bank.
The consultancy firm will also be responsible for holding a board alignment workshop. It will then have to outline the ‘Board Vision’ as an outcome of the board alignment workshop and agree on the “Action Plan for the Board”. The firm will also evaluation of independent directors. The chosen firm will have to complete these tasks within 6-8 weeks.
The board of directors of Bank of Baroda is headed by Chairman Hasmukh Adhia. Bank of Baroda’s decision to evaluate its board is in line with a guidance note in this regard by SEBI for listed companies.
