The Centre will merge state-run Dena Bank, Vijaya Bank and Bank of Baroda, Financial Services Secretary Rajiv Kumar announced on Monday. “[The] Merger of the three banks will make this the third largest bank of the country,” said Kumar.

The government will continue to provide capital support to the merged bank. The boards of three banks will examine the amalgamation proposal. The three banks will continue to function independently till the merger. The government hopes the process of amalgamation will be completed by the end of this financial year. The new merged bank will have a total business of more than Rs 14.82 trillion, according to Mint.

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The name of the new entity is yet to be finalised. “No employee will face any service conditions which are adverse in nature,” said Finance Minister Arun Jaitley. “The best of the service conditions will apply to all of them.” He said the decision was taken so that the banking sector’s lending abilities improves.

Jaitley said the bank merger had been announced in the Union Budget. “Government had announced in the budget that consolidation of banks was also in our agenda and the first step has been announced,” he said.

This comes at a time when the country’s banking sector is grappling with rising non-performing assets. State-run banks account for the lion’s share of bad loans. Asked about NPAs, the finance minister said the matter had come to light only in 2015. The Congress-led UPA government had swept it under the carpet, Jaitley alleged. He added that such assets had grown due to “evergreening loans”.

The proposed merger follows a similar move by the government in 2017. Five associates and the Bharatiya Mahila Bank became part of the State Bank of India, helping the country’s largest lender by increasing its assets and cutting its expenses through synergies.