The central government on Monday said the state-owned Bank of Baroda, Vijaya Bank and Dena Bank would be merged to create the country's third largest lender, as part of efforts to revive credit and economic growth.

The move follows top lender State Bank of India (SBI) last year merging with itself five of its subsidiary banks and taking over Bharatiya Mahila Bank, a niche state-run lender for women. Announcing the plan, Finance Minister Arun Jaitley said the merger would make the banks stronger and sustainable as well as increase their lending ability. Giving the context of the merger, he said bank lending was becoming weak, hurting corporate sector investments. Also, many banks were in a fragile condition due to excessive lending and ballooning NPAs, he said. "This amalgamated entity will increase banking operations," he said.