State Bank of India 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.
State-owned Power Finance Corporation (PFC) has completed the acquisition of majority stake in REC Ltd by transferring Rs 14,500 crore to the government.
The merger of both the entities is expected to be completed in the next fiscal year in consultation with the government. This acquisition and merger will make PFC second-largest government-owned financial player in the country based on the current market capital after State Bank of India (SBI) and also PFC will be the third-highest profit-making financial player in India.
About the Acquisition
- PFC paid Rs 14,500 crore to the Union government to buy a 52.63% stake in REC.
- This acquisition results in an $80-billion lending giant by assets and potentially helps in faster resolution of stressed assets in India’s power sector.
- The acquisition also helped the union government exceed its disinvestment target of Rs 80,000 crore for the fiscal year 2018-19.
- The consolidation will help in raising funds at competitive costs and lead to convergence of lending policies and rates.
- Further, it will also help in improving asset quality and impress upon state utilities to improve their performance.
PFC taking over REC makes it a dominant player not only in the power sector but also in the entire financial market space. PFC’s strategic importance to the government will further increase upon completion of the acquisition as the combined entity will become the biggest non-bank finance entity in which the government holds a controlling stake.
Since the PFC and REC have a robust presence in the consortium of lenders to power companies, the consolidation will help in the faster resolution of stressed assets.