Bank of Baroda
September brought a sign of progress in India’s ambitions to transform its debt-addled state-owned banking sector. We are a long way from the endgame of six state banks prime minister Narendra Modi once mentioned – there are still more than 20 of them in fact – but the recommended merger of Bank of Baroda, Vijaya Bank and Dena Bank is at least a step in the right direction.
This is what the market wanted: fewer banks, resolving bad loans through the new bankruptcy court process, recapitalized and ready to start lending again. But there is one nagging doubt about the whole process. A culture is emerging where the dismal are rewarded and the able are impeded.
Acquisition
Although the recommendation, from a panel chaired by finance minister Arun Jaitley, is billed as a three-sided merger, what is really happening here is that Bank of Baroda is acquiring the other two. Baroda’s deposit base is more than double that of Vijaya and Dena combined.
But the two banks Baroda must absorb are very different animals.