IOB's Bharat Overseas buy may need House nod

Before Indian Overseas Bank (IOB) gains complete control over the private sector Bharat Overseas Bank (BhOB), it may need to get parliamentary approval for the acquisition.

IOB "� a public sector bank headquartered at Chennai "� is governed by the Bank Nationalisation Act.

The government may have to prepare a scheme for IOB's acquisition of BhOB and place it before Parliament for approval, banking sources said.

In the case of a merger between a public sector bank and a private bank or acquisition of a public sector bank of a private bank, both the Nationalisation Act and the Company law come into play, sources added.

Asked about the status of acquisition, T S Narayanaswami, chairman, IOB, told Business Standard from Chennai that the finance ministry is handling the matter.

"Wait for a month to see or hear from the ministry," he said. On February 14, 2006, the board of IOB decided to make a proposal to buy shares of BhOB held by other shareholders at Rs 155 per share. IOB holds 30 per cent stake in the private sector bank.

The other shareholders of the private sector bank are Bank of Rajasthan (16 per cent), Vysya Bank (14.66 per cent), Federal Bank (10.67 per cent), Karur Vysya Bank (10 per cent), South Indian Bank (10 per cent) and Karnataka Bank (8.67 per cent).

BhOB, with an equity base of Rs 15.75 crore, has over 100 branches with high concentration in south India. It was originally designed to anchor Indian banks' overseas operations.

The bank was set up after the Thai government asked Indian Overseas Bank to close its Bangkok branch in 1969 after its nationalisation.