Mumbai: The heads of the three state-run banks awaiting merger —Dena Bank, Bank of Baroda (BoB) and Vijaya Bank—will meet by 12 October to plan out its implementation, Dena Bank’s newly-appointed managing director (MD) and CEO Karnam Sekar said.

“Some basic discussions have happened between all three of us (CEOs) last week; we will meet by 12 October, but the date has not yet been finalized. We have been speaking to each other but have not yet met on the merger," said Sekar.

He added that the three bank chiefs will meet to form a coordination committee and chalk out a plan for the merger. “We need to work on what would be the broad contours of the exercise along with the timelines. We also need to find out what are the areas where all three banks need more harmonization," said Sekar.

Following primary discussions, he said, the plan is to have one coordination panel for the entire amalgamation, but, if, during the meeting, they feel the need to have sub-committees for verticals like human resources and IT infrastructure, those will be formed. “The panel would primarily comprise the three MD and CEOs but the executive directors can be included at a later stage," he said.

According to Sekar, while all three banks use Infosys’s Finacle core banking solution, they have different versions of the software. While Dena Bank and Vijaya Bank are on Finacle 7.2, Bank of Baroda has recently updated to Finacle 10.2.

“Similarly, all systems and procedures, and product portfolios will have to harmonize as well. Other matters like branch rationalization will also be discussed," he said.

On 10 September, the government proposed the merger of the three state-owned banks. The merged entity, comprising two relatively stronger banks and a weak one, will be the third-largest lender in India, after State Bank of India (SBI) and HDFC Bank Ltd, with total business of ₹ 14.82 trillion.

Sekar, who was part of the SBI management in his previous role, has seen the merger of the bank with its subsidiaries in 2017 and hopes to bring those lessons to the table for this proposed merger. He was a deputy MD at SBI before being appointed to his current post on 19 September.

On branch rationalization, Sekar said while there will be overlaps in branches in some areas, it will not be in as many instances as SBI with its erstwhile subsidiaries. “While Dena Bank and Bank of Baroda have more branches in the west, Vijaya Bank is largely present in the South. I do not think there will branch duplication as we had in SBI and its associates," he said, adding that the coordination committee will discuss this too. The new CEO also has plans to bring down impaired assets. Dena Bank has been barred by the Reserve Bank of India (RBI) from all kinds of lending under its prompt corrective action (PCA) framework, owing to a high percentage of bad loans. Sekar said that of the bank’s gross bad loans of ₹ 15,866 crore at the end of the June quarter, a major chunk is before the National Company Law Tribunal (NCLT).

“We are minority lenders in most of these NCLT cases and therefore have to depend on what the majority lenders do. In a few accounts where we are the lead lenders, we will have to push for recovery," he said, adding that around ₹ 2,000-3,000 crore of bad loans will be sold to asset reconstruction companies (ARCs) and some more will be dealt bilaterally through one-time settlements.

“So, by March 2019, we hope to bring the gross NPAs down to ₹ 10,000 crore," he said

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