IFCI to merge with PNB

IFCI Ltd, the country's oldest development finance institution, will merge with Punjab National Bank. The boards of the two institutions met yesterday to clear the merger in principle.

After the merger, PNB's asset base will rise from Rs 86,000 crore in March 2003 to over Rs 1,01,000 crore.

PNB Chairman and Managing Director SS Kohli said the merger would take place after the transfer of IFCI's bad assets, estimated at over Rs 6,000 crore at the end of March 2003, to an asset reconstruction company. PNB will soon start an exercise to arrive at the swap ratio.

"The board decided in principle to go ahead with the merger, which is subject to regulatory clearances, but no date has been fixed for completing the process," according to IFCI Chairman VP Singh, whose extended term ends on Saturday.

In the absence of a full-time chairman, the management of the institution will be overseen by two executive directors, RM Malla and MV Muthu, who will report to the board.

While the merger was not on the agenda for the PNB or IFCI board meetings, the proposal was circulated to the directors.

The government is likely to provide for carrying forward IFCI's losses by amending the Income Tax Act to facilitate the merger.

So far, the benefit was restricted to mergers between companies and banks. It was not available for a merger of a bank with a financial institution.

Both IFCI and PNB scrips closed lower than their opening prices on the Bombay Stock Exchange yesterday. While PNB closed at Rs 257.30 compared to the opening price of Rs 279, the IFCI scrip opened the day at Rs 18.60 and closed at Rs 18.05.