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Canara, Dena banks may merge
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#1
The government may facilitate merger of Dena Bank with Canara Bank, which would create an entity with expected business of around Rs five lakh crore in the current fiscal.

Two days after the finance ministry officials met heads of five PSU banks over the issue of consolidation, the Dena Bank chairman and managing director, Mr D.L. Rawal, met the financial services additional secretary, Mr G.C. Chaturvedi, on Friday.

The two are learnt to have discussed consolidation among other issues, sources said.

On November 18, the chairmen of five leading banks — Punjab National Bank, Bank of Baroda, Canara Bank, Oriental Bank of Commerce and Union Bank of India — had met Mr Chaturvedi to explore the possibilities of creating few large PSU lenders through mergers and acquisitions.

The Canara Bank CMD, Mr A.C. Mahajan, believes that consolidation of banks is good in a way as it envisages healthier banks in the global scenario and banking market. He said, “It will be a good advantage.”
Mr Mahajan added, “We are looking at geographical synergy so that where
we are not present we should have an inorganic growth.”

The bank is deficient in the western region basically in states of Maharashtra and Gujarat, he had said.

About two years ago, Canara Bank had appointed global consultancy firm Ernst & Young for due diligence to merge Dena Bank with itself. However, not much headway could be made on the matter.

The proposed merger between the two lenders would proceed only after the boards of the two banks clear the matter.

Besides, shareholders’ approval is also required for the merger along with that of employees, the sources said.

The government holding in Canara Bank is over 73 per cent, while in Dena bank GoI has little over the statutory cap of 51 per cent, which restricts the bank from raising capital by diluting stake for its expansion plans.

The finance ministry is in favour of voluntary consolidation of state-run banks to create mega banking institutions to counter foreign competition.

But on the flip side, banks would have to first convince their unions to accept any merger.

Apart from the merger of State Bank of Saurashtra into the parent company SBI and the plans of another subsidiary — State Bank of Indore — for the same, not much is happening on the consolidation front of the public sector banks currently.

Mr Mahajan added that the bank has plans to expand its presence overseas. Its branches would be opened in cities like Frankfurt, Muscat, Tokyo, New York and Sao Paulo. —

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#2
The current employees and union should understand and encourage such mergers in the interest of fiscal revenue. It will also help in the development of regional banks.
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