Financial Daily from THE HINDU group of publications
Tuesday, Jan 10, 2006
Financial Daily from THE HINDU group of publications Tuesday, Jan 10, 2006 |
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RBI & Other Central Banks Money & Banking - Mergers & Acquisitions RBI readies draft scheme for Federal, Ganesh Bank merger Our Bureau
Mumbai , Jan. 9 THE Kerala-based Federal Bank has made an offer to take over Ganesh Bank of Kurundwad Ltd, which was placed under a moratorium by the RBI on Saturday. Based on the Federal Bank's offer, the RBI has prepared a draft scheme of amalgamation and given both the banks two weeks, up to January 21, to decide. Mr M. Venugopalan, Chairman and Managing Director, Federal Bank, said, "Our estimate is that the takeover would cost us only about Rs 10-15 crore as it is a very small bank. Only after the RBI audit, we will know the actual figure." Larger presence: The merger will increase Federal Bank's exposure in Maharashtra. Currently, the bank has 20 branches in the State and the acquisition of Ganesh Bank will add 24 more. "Ganesh Bank of Kurundwad is a good fit as it would also help us improve our agriculture and retail lending," Mr Venugopalan said. Federal Bank's retail portfolio is 24 per cent of the total advances, while agriculture lending is 10 per cent. According to the RBI, the Federal Bank has, among other things, agreed to pay the depositors fully. "The Reserve Bank has examined the proposal received from Federal Bank keeping in view its financial parameters, retail network and synergies as well as strategic advantages. Taking into account the interest of the Ganesh Bank's depositors, the RBI has prepared a draft scheme of amalgamation," the RBI said in a statement today. Other acquisitions: Federal Bank had recently tried to takeover Lord Krishna Bank, but it did not work out, as both parties could not agree on the issue of valuation. When asked about more acquisitions Mr Venugopalan said, "If an opportunity comes up in future, we would be interested. Acquiring this bank will also give us a firsthand experience in what things need to be done. As it is a small bank the risks are less." The RBI put Ganesh Bank of Kurundwad under a moratorium on January 7, thereby freezing the bank's operations, as its net worth had turned negative. The bank was also unable to come up with any credible plan to raise fresh capital, the RBI had said in its release. Ganesh Bank has 32 branches in Sangli, Kolhapur (Maharashtra) and Belgaum (Karnataka). As on March 31, 2005, the bank's deposits were at Rs 217.43 crore and advances were Rs 105.73 crore. Its gross non-performing assets were 18.04 per cent, while net NPAs were 8.32 per cent. On Monday, Federal Bank's shares ended at Rs 185.05 on the BSE, 0.4 per cent lower from the previous close of Rs 185.80.
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