Following years of discussion and being the most guarded secrets, government has decided to consolidate the nationalised banking space with a mega merger of three biggest state-run banks – Bank of Baroda, Dena Bank and Vijaya Bank. This will be the biggest merger that will set a new huge bank which will become India’s third largest lender.

Foreseeing the reduction in amount of capital government needs to pump into state-run banks and help clean the balance sheets, the government has been secretly planning to merge India’s three state-run banks. Decision taken by a ministerial panel comprising Finance Minister Arun Jaitley, Railway Minister Piyush Goyal and Defence Minister Nirmala Sitharaman on Monday, it was perhaps the most guarded secrets of the banking sector – so much that it came to be a surprise even for the top executives of all three banks that are to be merged.

Making the announcement, the Panel of ministers said, “Aspirations of the fastest growing economy have to be supported by stronger and globally competitive banks, with increased choices to the stakeholders. The boards of Vijaya Bank, Dena Bank and Bank of Baroda have been advised by the alternate mechanism (the ministerial panel) to consider the proposal.” The date for the board meeting is not fixed yet and the banks await for formal communication regarding the merger. But, according to the officials, the entire process may take around six-months or so.

Jaitley believes that this merger won’t affect the employment of its employees, and won’t dilute the services of any of the banks, just like the SBI merger. As India is currently facing the weak economy, falling rupee and increasing oil prices, this merger will improve the Indian economy. The main purpose behind this large merger is to improve the operational synergy of all three banks, as the government believes that the merger will create One Largest Indian Lender than three smaller entities operating the same business. This merger will kick-off the merger happened in April 2017, which included the merger of the total five banks with one largest Indian Bank SBI.  The name for the new entity has not been decided yet.