Bank of Baroda tanks 14%, Dena Bank hits upper circuit on merger news

Shares of state-run lender Bank of Baroda declined as much as 14 per cent in the early trade on Tuesday after the government on Monday announced it will will merge state-owned Vijaya Bank, Dena Bank and Bank of Baroda to create India's third largest lender.

Cheered by the news, Dena Bank hit an upper circuit limit of 20 per cent in the opening deals while Vijaya Bank was trading flat at Rs 60.20 apiece on BSE, up 0.67 per cent.

The central government on Monday proposed to create the country’s third-largest bank by amalgamating Mumbai-based Dena Bank and Bengaluru-based Vijaya Bank with much larger Bank of Baroda (BoB) in an all-stock deal. The banks’ boards are expected to meet in 10 days to take a call. The deal, though, is almost a certainty since the government is the majority owner. READ MORE

“The government had announced in the Budget that consolidating banks was on our agenda and the first step has been announced,” Finance Minister Arun Jaitley said. He justified the action, stating that the government and the Reserve Bank of India (RBI) were forced to take “concrete steps” once the asset quality review of banks revealed the bad debt rot in Indian banks was far deeper than what was projected earlier.