Dena Bank to merge with Canara Bank

The government may look to merge Dena Bank with Canara Bank as part of its bank consolidation plan. CNBC-TV18's Research Analyst Sunita Nagpal reports.

Here is a verbatim transcript.

There was meeting held between Finance Minister Official and five PSU Chairmen and post that what Newswire 18 has picked up is that Canara Bank and Dena Bank may be merging. If we look at what this merger could mean for these two banks; Canara Bank is the third largest PSU bank and that is why it needs to grow to compete with the State Bank of India. The balance sheet is roughly about Rs 2 trillion in size and it has about 2,800 branches and of which most are based in Southern India and so it is looking for acquiring a bank which has presence in either North India or Western India.

Dena Bank is smaller in size and it has presence mostly in Western India. So it makes sense for Canara Bank to acquire Dena Bnak. Also Dena Bank has slightly cleaner balance sheet and the bank also doesn't expect much issues arising out of HR side. If one looks at capital adequacy and government holdings in these two banks, capital adequacy in Dena Bank is just 12% and that is why they have applied for government to infuse about Rs 1,200 crore, so that they can improve on their capital adequacy. Government holding is about 51% in Dena Bank where as in case of Canara Bank government holding is 73%. So Dena Bank was expecting that Rs 600 crore infusion to come this year and Rs 300 crore, Rs 300 crore in subsequent years. So now if the merger is going to happen then Dena Bank might just need Rs 600 crore this time. But next two years it might not require the infusion if it is to merge and this stronger bank Canara Bank will be able to provide for growth in future.