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The Gulf operations of Bank of Baroda (BoB), the only Indian lender with a presence in the UAE, will get stronger following its impending merger with two other public sector banks, the bank's regional head said on Tuesday.
"However, it will be business as usual for our operations vis-a-vis customers in the UAE and other Gulf countries, albeit the strategic three-way merger will enable the new entity to emerge as the third-largest Indian bank with a wider and broad-based client base," said D. Ananda Kumar, chief executive (GCC operations), Bank of Baroda.
With better financial strength, the merged entity will also be well-positioned to substantially increase market reach, particularly in south India, and operational efficiency, said Kumar.
In the UAE, BoB has been operational for over 40 years. Currently, it has six branches, nine electronic banking service units and 46 ATMs.
The amalgamation, announced on Monday, will be the first-ever three-way consolidation of banks in India, with a combined business of ?14.82 trillion ($204 billion), making it the third largest bank after SBI and ICICI Bank.
After the merger, the number of public sector banks will come down to 19. "The consolidation will help create a strong globally competitive bank with economies of scale and enable realisation of wide-ranging synergies," Indian Finance Minister Arun Jaitley said.
This is the fourth major restructuring in the financial sector after Prime Minister Narendra Modi came to power. It kicked off with the merger of State Bank of India with its five subsidiaries along with the Bharatiya Mahila Bank, catapulting it to be among top 50 global lenders.
Banking sector reforms are a major plank of Modi's administration to revive lending, which has slowed to multi-decade lows as banks struggle with bad loans.
The government owns majority stakes in 21 lenders, which account for more than two-thirds of banking assets in Asia's third-biggest economy.
But these banks also account for the lion's share of more than $150 billion in bad debt which is weighing on the sector, and need billions of dollars in new capital in the next two years to meet global Basel III capital regulations.
The new bank is expected to have a net non-performing asset ratio of 5.71 per cent of its total assets, nearly 9,500 bank branches and 85,675 employees.
- issacjohn@khaleejtimes.com
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