Mushrooms? Cheese? Nah. Remember we are making an Indian masala omelette not a foreign one.
Now wait till the omelette cooks.
What do you get out of all this? An omelette which is not edible at all, despite the right ingredients being added to it.
Anyone eating an omelette made out the three eggs is bound to feel queasy after eating it. If the problem is with the eggs, the omelette is bound to turn out inedible.
Remember one egg was rotten and one slightly rotten. So what has happened? The mixture basically spoiled the one egg which was edible.
Dear Reader, if you are the kind who is busy and on the move, I think you should stop reading the piece right here. This is all you need to know about the merger of the three public sector banks. (Oh and please do sign up for my own newsletter by clicking here).
For the rest, I have a little more to say.
Take a look at the table below. It lists out the total advances, bad loans (gross non-performing assets) and bad loans rate of the three public sector banks which are to be merged. A bad loan is a loan on which repayment has stopped for 90 days or more.
Bad Loans Comparison of the Merged Banks
|Name of the bank |
(as on June 30, 2018)
|Total advances |
(in Rs crore)
|Bad loans |
(in Rs crore)
|Bad loans rate (in %) |
|Bank of Baroda ||4,48,327 ||55,875 ||12.5% |
|Vijaya Bank ||1,22,348 ||7,579 ||6.2% |
|Dena Bank ||69,917 ||15,866 ||22.7% |
|Total Bank ||6,40,592 ||79,320 ||12.4% |
Source: Analyst/Investor presentations of the banks.
What does Table 1 tell us? Dena Bank is the worst bank of the lot. It has a bad loans rate of 22.7%. This basically means that for every Rs 100 of loans given by the bank Rs 22.7 are not being repaid.
Bank of Baroda is in a slightly better state with a bad loans rate of 12.5%.
Vijaya Bank is by far the best of the lot with a bad loans rate of 6.2%. In fact, among all public-sector banks, this bank has the lowest bad loans rate. The bad loans rate of Vijaya Bank is even better than that of large private sector banks like ICICI Bank and Axis Bank. This is very credible indeed.
As per the latest data, the merged bank, would have a bad loans rate of 12.4%, which is not very different from the bad loans rate of Bank of Baroda, which as per advances made, will form 70% of the new bank.
The PSU Merged Banks are Not all Good Eggs
No wonder the stock market is not impressed. As I write this, the share price of Bank of Baroda is down by 11.5%, with the market capitalisation having fallen by more than Rs 4,000 crore, from yesterday's close.
Not surprisingly, the share price of Dena Bank, is up 19.8%, given that the bank has got a new lease of life. It's market capitalisation is a little over Rs 4,300 crore. The Bank of Baroda has nearly lost the market capitalisation of Dena Bank. The Vijaya Bank stock price is down 1.6%.
Dena Bank is a very small bank with a large amount of bad loans. As of March 2018, its advances amounted to 1.15% of the total advances made by public sector banks. Once we take advances made by private banks and foreign banks operating in India, the advances amount to less than 1% of the total advances made by banks in India.