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Our Bureau

Mr M. Damodaran

Mumbai , Jan. 20

THE shareholders of IDBI Bank will get 100 shares of IDBI for every 142 shares held by them. The boards of IDBI and IDBI Bank approved the share swap ratio for the merger on Thursday.

IDBI will transfer 2.5 per cent of its shareholding in IDBI Bank to a trust in order to give value to IDBI's shareholders, said Mr M. Damodaran, Chairman, IDBI.

IDBI will extinguish the balance shares held by it in IDBI Bank. The central Government holding in the merged entity will be at 51.4 per cent, he told presspersons, on the sidelines of the board meetings here.

IDBI's holding in the bank at the end of December 2004 quarter was 55.33 per cent, while SIDBI holds 13.83 per cent. The amalgamation will be with retrospective effect from October 1, 2004, and the process is expected to be completed by March 31, 2005. "We need to recast the balance sheet of IDBI for the six-month period," Mr Damodaran said.

The business model of the bank, post-merger will have two strategic business units. While one SBU will focus on development finance (corporate banking), the other will cater to commercial banking needs such as retail etc.

On issues related to the statutory liquidity ratio liabilities, Mr Damodaran said that IDBI Bank was fully compliant with SLR requirements, and while IDBI had a five-year regulatory forbearance on meeting its SLR requirements, the merged entity will continue to honour the SLR commitments now being fulfilled by IDBI Bank.

On the issue of priority sector requirements, he said, "IDBI has been in conversation with RBI that priority sector should be redefined to capture our business model as our area of business is project finance."

IDBI is also in talks with the central bank for special dispensation with regard to its equity exposures, he said.

The scheme for amalgamation of IDBI and IDBI Bank is subject to the approval of the RBI and the shareholders of the two entities. IDBI has convened an EGM on February 23.

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