Why in the news ?
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According to the India Ratings, the proposed merger of three public sector banks, Bank of Baroda, Vijaya Bank and Dena Bank could lead to rise in NPAs in the short-term.
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However, the Rating said the merger is expected to result in better operating efficiency in the long run.
More in news
- Findings of the India Ratings :
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The merged entity may see reduced operating costs, lower funding cost and strengthened risk management practices.
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Merger will see increase in the scale and reach moderately.
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However, in the short-term, the slippages could increase as recognition of non-performing assets is harmonised and accelerated.
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The asset-liability mismatch of the smaller banks (Vijaya and Dena Banks) can be better addressed at the consolidated level.
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The success of the proposed merger could impact the incremental capital ask from the government.
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It may also act as a roadmap for further consolidations in the public sector banking space.
Source
The Hindu