With Hunt For A Rescue Plan For Yes Bank On, Here's A Guide To How Mergers Fared In Past

Economy

There are reports of a swift resolution to the current Yes Bank crisis; with talks of mergers, consortium-led investment plans and other solutions being floated

Written By Sai Deepthi Pavani | Mumbai | Updated On:
RBI

The Reserve Bank of India (RBI) was forced to take control of Yes Bank after it failed to come up with a “credible revival plan” to raise business-sustainable equity. The central bank also placed a moratorium on the troubled lender on Thursday, restricting withdrawals to Rs 50,000 per depositor till April 3.

Some are drawing parallels between last year's Punjab and Maharashtra Co-operative (PMC) Bank crisis and Yes Bank, given the PMC depositors continue to face caps on withdrawal of cash. However, there are reports of a swift resolution to the current Yes Bank crisis; with talks of mergers, consortium-led investment plans and other solutions being floated.

READ | NSE Restricts Yes Bank Shares, Announces No Futures & Options Contracts From May 29

What would a merger mean? 

While a merger does not bring changes in the overall balance sheet, it increases the share ratios and performance of the weak banks as the profits from the strong bank are merged with it. Mergers are usually seen as a solution to stem the drain on the exchequer.

In September 2019, Finance Minister Nirmala Sitharaman announced a mega-merger of ten state-run banks into four.

READ | BIG: SBI Boss Rajnish Kumar Confirms In-principle Approval For Yes Bank Bailout Investment

How mergers have fared in the past:

Dena Bank, Vijaya Bank and Bank of Baroda merger in 2019:

When Dena Bank recorded huge gross NPAs (Non-Performing Assets) of 22%, the Centre announced the merger of three banks — Bank of Baroda, Vijaya Bank and Dena Bank — which came into force in April 2019. The combined capital made it the third-largest bank with 34% of low-cost deposits, a capital buffer of nearly 12% and a business book of Rs 14.82 lakh crore.

SBI merger with associate banks in 2017:

The merger of State Bank of India with five of its associate banks and Bharatiya Mahila Bank was done in April, 2017. The merger fared positively, bringing additional assets of Rs 7.49 lakh crore to the SBI's balance sheet of Rs 27.05 lakh crore.

Kotak Bank-ING Vysya Bank merger in 2015:

In 2015, we saw the merger of two private banks — Kotak Bank and ING Vysya Bank. The merger fared well with assets growing over Rs 3 lakh crore.

Centurion Bank-HDFC merger in 2008:

In April 2008, the Centurion Bank of Punjab merged with private lender HDFC. Post the merger, the gross NPAs increased marginally for a short period but have remained below 1% since.

Other mergers in pipeline

Interestingly, a merger of the branches of Maharashtra State Co-operative Bank (MSCB) with PMC has been proposed as well. The proposal is for a merger of the branches in Gujarat and other states where PMC has a presence. 

READ | 'Scheme To Revive Yes Bank Soon; 30 Days Outer Limit For RBI Moratorium': Shaktikanta Das

READ | 'Personally Monitoring Yes Bank Situation, Depositors' Money Safe': FM Sitharaman

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