IDBI eyes PSBs for merger

IDBI Ltd chairman M Damodaran today stated "we will look only at 19 public sector banks (PSBs)" for a merger, ruling out any plans of taking over a private sector bank.

"The banking entity is open to inorganic growth however we would be looking at the universe of 19 public sector banks to ensure that government holding in the merged entity does not fall below 51 per cent, said Damodaran.

He was speaking on the sidelines of a press conference in Mumbai to announce a marketing tie up of UTI Mutual Fund with HDFC Bank.

The development financial institution, Industrial Development Bank of India (IDBI), was converted to a bank on October 1 and is on the prowl to expand its balance sheet size through inorganic growth.

While market rumours suggested a merger of UTI Bank with the new entity, Damodaran's statement today ruled out any such possibilities since this would result in a dilution of government holding in IDBI Ltd.

The new entity is open to a merger with other financial institutions provided that it will have no adverse impact on its shareholders.

Meanwhile, the proposed merger of the institution with IDBI Bank is scheduled to be completed by the end of the current financial year. While the swap ratio has yet to be decided, Damodaran said it would be decided in a manner whereby government holding is maintained.

The new banking entity, IDBI Ltd has appointed FCB Ulca, the advertising agency, to undertake the branding exercise for the proposed merged entity. This entity will have a balance sheet size of Rs 80,000 crore and a network of over 200 branches and 300 ATMs.

IDBI Ltd will roll out the voluntary retirement scheme beginning November 1. It has 2,801 employees.

"We do not have a target for the VRS, but we expect around 150 to 200 employees to avail of the scheme, said Damodaran.

The new entity is also planning to appoint an human resource consultant to revamp its compensation structure.