HDFC Bank Current Affairs - 2019
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The Reserve Bank of India (RBI) has stated that all branches of public sector lenders Vijaya Bank and Dena Bank will function as branches of Bank of Baroda (BoB) from April 1, 2019, and the proposed merger Bank of Baroda with Dena and Vijaya Bank will be affected from April 1.
Plan of Merger
As per the proposed merger plan, shareholders of Vijaya Bank will get 402 equity shares of BoB for every 1,000 shares held and the shareholders of Dena Bank will receive 110 equity shares of BoB for every 1,000 equity shares held.
The boards of Vijaya Bank and Dena Bank will stand dissolved. The entire share capital of Vijaya Bank and Dena Bank will stand cancelled and the shares of both these banks will also stand delisted from stock exchanges.
Following the merger of these state-owned banks, BoB will become the third largest bank in India after the State Bank of India and HDFC Bank.
The consolidated bank will have over 9,500 branches, 13,400 ATMs, 85,000 employees to serve 12 crore customers. The bank will have a business mix of Rs 15 lakh crore of balance sheet, with deposits and advances of Rs 8.75 lakh crore and Rs 6.25 lakh crore, respectively.
The Reserve Bank of India (RBI) has announced that SBI, ICICI and HDFC Banks would continue as Domestic Systemically Important Banks (D-SIBs) for 2018.
- The recognition as Domestic Systemically Important Banks (D-SIBs) implies that banks are too big to fail. This creates an expectation of government support for them in times of financial distress.
- As a result, banks enjoy certain advantages in funding markets. Inclusion in the list gives additional comfort to investors that these banks won’t be allowed to fail and therefore, borrowing costs of these banks from the markets are cheaper than their peers.
- Inclusion in D-SIB also implies that the failure of any of these banks would have a cascading effect on the Indian financial system.
- These D-SIBs are required to maintain an additional common equity requirement based on the bucket in which a D-SIB is placed.
- SBI in the third bucket was setting aside 0.45 per cent of its assets as an additional capital requirement and have to set aside 0.60 per cent of its risk-weighted assets.
- ICICI Bank and HDFC which are in the fifth bucket are required to set aside 0.20 per cent Bank’s capital requirement from 0.15 per cent now.
RBI had initiated the recognition as D-SIBs from 2015 and places these banks in appropriate buckets depending upon their Systemic Importance Scores (SISs).