After the Global Trust-UTI Bank merger fiasco, and the endless grilling by the Joint Parliamentary Committee (JPC), a wiser Reserve Bank of India is not taking any chances with ICICI's proposed merger with ICICI Bank. The apex bank has appointed audit and consultancy firm AF Ferguson to look into the swap ratio of the proposed merger before giving its nod. This is the first instance of the RBI appointing an external agency to validate the merger of financial intermediaries.
Industry sources said Ferguson is also conducting an on-site audit of the ICICI and ICICI Bank books in the run-up to the merger which is slated to take effect on March 31. However, a senior ICICI executive pointed out that Ferguson is only looking at the swap ratio and not doing any audit.
The RBI has inspected the books of the institution as well as the bank thrice in the calendar year 2002. It started with a routine year-end audit, followed by a special inspection before giving its nod to ICICI's non-life venture and finally another special inspection of books has been undertaken before clearing the merger.
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RBI deputy governor G Muniappan took stock of the situation on Wednesday with the ICICI brass. Meanwhile, a Ferguson team is camping in ICICI headquarters for nearly a month now.
The ICICI and ICICI Bank boards had, on October 25, approved the reverse merger of the financial institution with the bank at a share exchange ratio of one domestic equity share of ICICI Bank for every two domestic equity shares of ICICI.
In case of the American depository shares (each ADS of ICICI represents five domestic equity shares and that of ICICI Bank), two domestic equity shares), the ADS holders of ICICI will be issued five ADS of ICICI Bank in exchange of every four ADS held in ICICI.
JM Morgan Stanley was appointed by ICICI to advise it on a fair exchange ratio, while ICICI Bank appointed DSP Merrill Lynch. Both ICICI and ICICI Bank jointly appointed Deloitte, Haskins & Sells to recommend the final share exchange ratio.
Davis Polk & Wardwell are the international legal counsel and Amarchand & Mangaldas & Suresh A Shroff & Co the domestic counsel for the merger.
Sources familiar with the developments said the merger schedule is on course and it is expected to be through by March 31. "The RBI has adopted an extremely cautious approach as the JPC has been grilling the central bank on a whole lot of issues. It can't afford to take any chances if questions are raised in Parliament tomorrow," an RBI insider said.
On its way to becoming a bank, ICICI has been aggressively mobilising deposits and selling off assets to fulfil its SLR and CRR commitments. The merged entity will have a CRR and SLR requirement of Rs 18,000 crore.