Govt Considering Merger Of Bank Of Baroda, IDBI Bank, Oriental Bank, Central Bank

| June 4 , 2018 , 12:33 IST

The government is reportedly considering the merger of at least 4 state-run banks, including Bank of Baroda, IDBI Bank Ltd, Oriental Bank of Commerce and Central Bank of India to help stem the rise in bad loans in their books. The possible merger was revealed by two people aware of the topic to LiveMint on Monday.

If the government proceeds with the merger, the end-result entity would become the second-largest bank in India after State Bank of India with combined assets of Rs 16.58 trillion. The merger would also allow the weaker banks to sell assets, reduce overheads and shut down money-losing branches.

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The 4 banks that are in consideration for being merged have had combined losses of Rs21,646.38 crore in the year ending March 31. The department of financial services under the Ministry of Finance is also reportedly considering a 51% stake sale in IDBI Bank to a strategic partner worth Rs 9,000-10,000 crore.

“Dilution of (government) stake in IDBI Bank could also be achieved through stake sale to private equity investors," a source was quoted by LiveMint as saying.

IDBI Bank in a regulatory filing on May 21 had told the exchanges that a special resolution would be placed for further issue of capital at its board meeting on May 25, but on the following day IDBI Bank informed the exchanges about a 'scrutinizer report' for an increase in the bank’s authorized capital to Rs8,000 crore from the current Rs4,500 crore.

With the increase in authorized capital, the sale of 51 percent stake could be facilitated in the form of a preferential issue to investors.

Meanwhile, government officials have declined to comment, saying that the issue is highly market sensitive. In the past, the government had merged SBI with 5 of its associate banks and the Bharatiya Mahila Bank in April 2017.