State-run Bank of Baroda is catapulting itself for a larger play in the country’s banking system with the merger of Dena Bank and Vijaya Bank with itself from April 1.

The government-forced merger, announced in September, creates India’s third largest bank after State Bank of India and ICICI Bank.

This is the second merger of state-run banks in recent years after SBI had merged five of its associate banks - State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Mysore, State Bank of Travancore and State Bank of Hyderabad - and also Bhartiya Mahila Bank with itself effective from April 2017.

“We are extremely pleased that Bank of Baroda, Vijaya Bank and Dena Bank are coming together, creating the second largest bank in terms of network and customer base. We would work for the success of the amalgamation by effective execution of all the activities to build a stronger organisation and collectively deliver more to stakeholders than that of sum of individual entities,” BoB chief P.S. Jayakumar said in a press release.

The RBI had said on March 30 that branches of Dena Bank and Vijaya Bank would function as BoB outlets from April following the amalgamation. BoB said the consolidated bank will have more than 9,500 branches, 13,400 ATMs and 85,000 employees to serve 12 crore customers.

The bank will have a business mix of Rs 15 lakh crore of balance sheet, with deposits and advances of Rs 8.75 lakh crore and Rs 6.25 lakh crore, respectively.

The lender said the complementary branch presence will add to its network in western and southern states. Post-amalgamation, the bank will have a 22 per cent market share in Gujarat and 8-10 per cent market share in Maharashtra, Karnataka, Rajasthan and Uttar Pradesh.

To make merger a smooth affair, the government last week decided to infuse Rs 5,042 crore in BoB to enhance its capital base to meet additional expense.

According to the Scheme of Amalgamation, shareholders of Vijaya Bank will get 402 equity shares of BoB for every 1,000 shares held. In the case of Dena Bank, its shareholders will get 110 shares of BoB for every 1,000 shares.

The announcement of the three-way merger was among several reforms initiatives undertaken by Financial Services Secretary Rajiv Kumar to make public sector banks (PSBs) healthy, robust and globally competitive.

As part of the reform process, the government had also announced the transfer of a majority 51 per cent stake to LIC in IDBI Bank in August to transform the Mumbai-based lender.

Besides, the Department of Financial Services made a record capital infusion of Rs 1.06 lakh crore in PSBs in the current fiscal. As a result, five PSBs, including Bank of India, Corporation Bank and Allahabad Bank, were out of the Prompt Corrective Action framework of the RBI earlier this year. Non-performing assets have shown a negative trend in 2018-19 and have reduced by Rs 23,860 crore between April-September 2018.

Following the merger, the number of PSBs has come down to 18.