The board of state-run Vijaya Bank on Saturday gave its approval to the merger with Dena Bank and Bank of Baroda (BoB), moving a step closer to creating the country’s second-largest PSU lender.

In a communication to stock exchanges, Vijaya Bank said its board has given an in-principle nod to the merger proposal that was proposed by the finance ministry on September 17.

Vijaya Bank said the merger will create a lender that will have a scale matching some of the global banks.

It added that the amalgamation will enable it to compete more effectively in the domestic market.

According to the bank, greater scale and synergy would lead to cost benefits and higher productivity.

It would also ramp up credit growth apart from the merging entities adopting best practices. The PSU lender added that the merger would have a positive impact on financial inclusion and lead to improved risk management.

The board of Dena Bank had already given its nod to the merger.

The combined business of the entities would make it the second largest state-run bank after the SBI. As of June 2018, the combined business mix of these three lenders stood at Rs 14.82 trillion.

After the merger of BoB, Vijaya Bank and Dena Bank, the number of PSU banks will come down to 19.