The Hindu Business Line : Centurion, LKB merger may be delayed

The judgment on a petition challenging the merger, filed by a minority shareholder of the unlisted Lord Krishna Bank (LKB) in the Kochi High Court, slated for August 14, has been deferred for another week.

The boards of directors of both the banks had approved the proposal on August 19, 2006, which was subsequently ratified by banks’ shareholders.

However, the Reserve Bank of India is yet to grant its approval. The application filed with the RBI in October last year is still pending as the regulator is said to be awaiting the outcome of the court case, said an official with one of the banks.

Cautious approach

According to banking analysts, since it is a voluntary merger and the majority of both banks’ shareholders have approved it, the RBI in the normal circumstances would have given the clearance without any delay. But the regulator, they said, may be more cautious now to avoid the kind of situation it faced in the case of merger of Ganesh Bank of Kurundwad with the South-based Federal Bank.

The delay in the merger may affect Centurion Bank’s strategic plans. The merger is expected to provide the bank, which has almost reached its threshold foreign equity limits of 74 per cent, further room for raising foreign equity.

For LKB also the merger is crucial as on its own it will find it difficult to raise the capital required for its expansion.

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