Rationalisation of staff and branches after merger of banks

The Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980 provide that the Central Government, in consultation with the Reserve Bank of India (RBI), may make a scheme, inter alia, for the amalgamation of any nationalised bank with any other nationalised bank or any other banking institution. Various committees, including Narasimhan Committee (1998) constituted by RBI, Leeladhar Committee (2008) chaired by RBI Deputy Governor, and Nayak Committee (2014) constituted by RBI, have recommended consolidation of Public Sector Banks (PSBs) given underlying benefits/synergies.  Taking note of this and potential benefits of consolidation, Government, with a view to facilitate consolidation among public sector banks to create strong and competitive banks, that may serve as catalysts for growth with improved risk profile of the bank, approved an approval framework for proposals to amalgamate PSBs through an Alternative Mechanism (AM).

AM, after consulting RBI, in its meeting held on 17.9.2018, approved that Bank of Baroda (BoB), Vijaya Bank and Dena Bank may consider amalgamation of the three banks. As per information received from banks in this regard, after consideration of the amalgamation, the Boards of BoB and Vijaya Bank gave their in-principle approval and the Board of Dena Bank recommended for amalgamation. After considering banks and RBI’s inputs, AM in its meeting held on 20.12.2018 gave in-principle approval for the amalgamation of BoB, Vijaya Bank and Dena Bank. After obtaining RBI inputs, Government has notified the scheme of amalgamation for amalgamating Bank of Baroda, Vijaya Bank and Dena Bank. Further, it may be noted that the amalgamation will help in harnessing scale and synergy benefits, including through optimisation of banking network and resources, and thereby facilitate a wider offering of products and services, easy access to credit along with benefits for public at large in terms of enhanced access to banking services through a stronger network, and access to bank employees to a wider pool of opportunities. Further, the scheme of amalgamation protects employee interests by providing that every serving employee of the amalgamating banks shall be an employee of the amalgamated bank and shall continue to work in accordance with Board-approved terms and conditions of service, and that the Board of the amalgamated bank shall ensure that the interests of all employees of the amalgamating banks are protected. With regard to representation of bank officers and employees in PSBs, the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980 provide for workmen and non-workmen employee Directors on the Boards of nationalised banks. As on date, there is vacancy in these positions.

As regards turnaround plans, out of the three aforesaid banks, turnaround plans were approved by the Board of Dena Bank in the second quarter of financial year 2017-18. Subsequently, the bank informed that, upon placement of Government’s communication intimating the approval framework for consolidation of banks in its meeting held on 27.10.2017, Board members were positive on the issue of consolidation and wanted that the bank should study the balance-sheet and the synergies of some other PSBs for further deliberation on the matter. Thereafter, the bank informed that its Board, in its meeting held on 24.9.2018, gave approval for recommending amalgamation of Dena Bank, Bank of Baroda and Vijaya Bank. Thus, subsequent to approval of the turnaround plan, the bank’s Board has approved recommending the amalgamation. In this regard, it may be noted that as per the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, the general superintendence, direction and management of the affairs and business of the bank vests in its Board and, further, that as per the General Clauses Act, 1897, any power conferred by any Central Act is exercisable from time to time as occasion requires.

This was stated by Shri Shiv Pratap Shukla, Minister of State for Finance in written reply to a question in Rajya Sabha today.