Kerala bank to be merged with Punjab National Bank

Wednesday, 22 January 2003, 08:00 Hrs
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NEW DELHI: The Indian cabinet Tuesday approved the merger of a cash-strapped Kerala-based private bank with state-run Punjab National Bank (PNB).

The scheme to amalgamate the Nedungadi Bank with Punjab National Bank proposes that the business, properties, assets and liabilities of the former will be transferred to the state-owned bank, said an official spokesperson after a cabinet meeting.

Punjab National Bank, India's second largest bank by branches, had earlier said it was examining a proposal to take over the troubled Nedungadi Bank to boost its market presence in the country.

Reserve Bank of India (RBI), the country's central bank, recommended to the government in October last year the "compulsory amalgamation" of Nedungadi Bank with Punjab National Bank.

Punjab National Bank had approached the RBI for taking over Nedungadi Bank with a view to enlarge its branch network in the southern region of the country, said an official statement.

Nedungadi Bank, which has 175 branches and 1,619 employees, reported a net loss of 678 million in the year ended March 31, 2001.

The country's central bank had placed Nedungadi Bank under a moratorium last year on charges that the new generation private bank had allegedly violated central bank norms while lending to stockbrokers.

Under the RBI moratorium, which will remain effective till February 1, 2003, depositors of Nedungadi Bank are restricted from withdrawing more than 5,000.

The shares of Punjab National Bank and Nedungadi Bank had shot up sharply higher in the last couple of months' trade on reports that Punjab National Bank had submitted a proposal to the ministry of finance to take over the private sector bank.

Nedungadi Bank became available for takeover after the RBI initiated a move to oust broker-promoter Rajendra Bhantia from the bank.

The central bank made a decisive effort last year to free Nedungadi Bank from the grip of Bhantia, who controls a 32 percent stake in the bank. The RBI asked Bhantia to step down from the bank's board of directors.

Established in 1899, the Calicut-headquartered Nedungadi Bank closed fiscal year 2002 with a marginal net profit of 12.7 million. The bank posted a loss of 26.31 million in the second quarter ended September 30.

According to analysts, the acquisition of Nedungadi Bank by Punjab National Bank would give the public sector bank better reach in southern India where Nedungadi has a substantial customer base.

"All the employees of Nedungadi Bank will continue in service and be deemed to have been appointed in PNB at the same remuneration and on the same terms of service as were applicable to them before the amalgamation," said the statement.

"The amalgamation will be in the interest of the depositors of the bank," it added.
Source: IANS
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