Bank of Baroda Acquires

Gujarat Local Area Bank

Ltd

Type Traded as Industry Founded Headquarters Area served Key people

Public BSE: 532134 Banking, Financial services 1908 Vadodara, India Worldwide M. D. Mallya (Chairman & MD) Credit cards, consumer banking,corporate banking, finance and insurance, investment banking,mortgage loans, private banking,private equity, wealth management

Products

Revenue

25,800 crore (US$5.68 billion)(2011)

[1]

Net income

4,433 crore (US$975.26 [2] million)(2011)

Total assets

355,826 crore (US$78.28 [3] billion)(2011)

www.bankofbaroda.com

Website

Bank of Baroda
The Maharajah of Baroda, Sir Sayajirao Gaekwad III, founded the bank on 20 July 1908 in the princely state of Baroda, in Gujarat. The bank, along with 13 other major commercial banks of India, was nationalised on 19 July 1969, by the government of India. Bank of Baroda (BoB) is the third largest bank in India, after the State Bank of India and the Punjab National Bank and ahead of ICICI Bank. BoB has total assets in excess of Rs. 3.58 lakh crores, or Rs. 3,583 billion, a network of over 3,409 branches and offices, and about 1,657 ATMs. It plans to open 400 new branches in the coming year. It offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, credit cards and asset management.

 In its international expansion, the Bank of Baroda followed the Indian diaspora, especially that of the Gujaratis. It has significant international presence with a network of 72 offices in 25 countries, six subsidiaries, and four representative offices.

BOB Capital Markets Ltd. (BOBCAPS) is a SEBIregistered investment banking company based in Mumbai, Maharashtra. It is a wholly owned subsidiary of Bank of Baroda. Its financial services portfolio includes Initial Public Offerings, private placement of debts, corporate restructuring, Business valuation, mergers & acquisition, project appraisal and loan syndication.

SGLAB merger with Bank of Baroda

According to the RBI, South Gujarat Local Area Bank had suffered net losses in consecutive years and witnessed a significant decline in its capital and reserves. To tackle this, RBI first passed a moratorium under Section 45 of the Banking Regulation Act 1949 . RBI decided that all seven branches of SGLAB function as branches of Bank of Baroda. The final decision was to merge all branches of the bank . Bank of Baroda was against the merger.

Benefits
The clients of SGLAB were effectively transferred to Bank of Baroda, deriving the advantage of dealing with a more secure and bigger bank. It was able to merge with a bigger bank and able to retain its branches and customers. Since BoB was a large entity, addition of a small liability did not affect it much. The only drawback was financials involved were not too high.

Conclusion
The decision to merge SGLAB with BoB was taken keeping in mind the interests of the local area banks depositors. As per the merger formula, all assets and liabilities of SGLAB will be transferred to Bank of Baroda. The employees of SGLAB will also be absorbed in BoB. SGLAB was established on October 10, 2000. It has seven branches and 76 employees. The bank failed to maintain the minimum cash reserve ratio (CRR) and statutory liquidity ratio (SLR) requirements and had losses of Rs 3.69 crore as on September 30, 2003. Ironically, the idea of setting up local area banks (LAB) was mooted in 1996 by the then finance minister P Chidambaram . SGLAB was opened in 2000 and spread its network to the two districts of Surat and Bharuch. As per RBI guidelines, LABs were not allowed to function from more than three district areas.

Thank You