To help the banking sector both in terms of efficiency and scale, the government's plan of consolidation in the sector is fast gearing, as two more banks namely Vijaya and Dena Bank are reported to consider merger and talks are underway for the same.

The proposal of merger between the two banks is under consideration based on the two bank's synergies with respect to geographical reach. The potential merger between the two-state run small sized banks shall lead to an establishment of a mid sized bank.

Due to highly stressed balance sheet of Dena Bank, the capital requirements of the bigger merged new entity shall increase. The government's ambitious plan of consolidation in the banking sector also targets the long undetering crisis of NPAs in the industry. On approval by the government, the merger is likely to be effected by the end of this fiscal year.

Earlier, the government had given an in-principal nod to carry on the consolidation process in the public run banks.

After the news, the stock of Dena Bank surged while that of Vijaya Bank slumped and was last seen trading at Rs. 31.9 and Rs. 59 respectively.

Goodreturns.in