IDBI-IDBI Bank merger this fiscal

SBI our only benchmark: Damodaran.

Hardly three days after the proposal to merge GTB with OBC, IDBI today announce that it will merge IDBI Bank, its private banking arm, with itself in the current fiscal.

Soon after approving the merger, IDBI chairman M Damodaran claimed that the combined entity would reposition itself to become one the largest banks in the country, comparable only with SBI.

"We are now embarking on the journey of merger (of IDBI Bank with IDBI). I think, it will happen in this financial year," Damodaran said after the board meeting in Mumbai today.

The IDBI Bank board today cleared `in-principle' the merger proposal with its parent which would transform into a bank following the repeal of the IDBI Act.

Damodaran said the two entities would now work out the share swap ratio, complete the valuation and seek shareholders' and regulators' nod.

The new entity would "reposition" itself as a bank that focuses on development financing as mandated in legislation, while offering retail banking facilities, Damodaran said.

Asked whether IDBI would aim at overtaking ICICI Bank, which has emerged as the second biggest commercial bank following the reverse merger with ICICI, Damodaran said: "We have decided to use SBI's size as the right benchmark. Therefore, anything smaller than SBI is not a good enough benchmark for us."

After the merger, the entity would operate just like any other board-run company and would have a "very clear balance sheet".

He dismissed the suggestion that there was government intervention in the day-to-day operations of IDBI saying "it was a win-win situation for both IDBI and IDBI Bank."

"Neither has there been any attempt by the government to create any pressure nor would IDBI respond to such pressures. It will be a board-driven company," he said.

On the Rs 9,000 crore government assistance for setting up a stressed assets stabilisation fund, Damodaran said, "it's not a direct assistance to IDBI."

The government has provided zero-coupon bonds for the fund and there was no outgo of cash from the centre.

IDBI to get Rs 9,000 crore