IDBI, Bank merger likely to culminate in 2006

The merger of IDBI Bank with IDBI Ltd is not likely to happen until late 2006.

The process of merger will not gain momentum until the beginning of 2005 because the former is likely to receive notification for transforming itself into a bank only late this year.

Talking to reporters at the sideline of a press conference to announce the opening of its currency chest in Kolkata today, G V Nageswara Rao, chief executive officer and managing director, IDBI Bank, said that IDBI Ltd is likely to receive the government's formal notification for transforming itself into a bank by October this year.

The merger issue would be considered only later. Rao could not say anything definitive on the issue of the merger.

Sources close to the development said that the merger process would have to be preceded by a due-diligence of IDBI Bank and its 92 branches (likely to add 28 more) and this would require around another three to six months.

Then there would be question of valuation and equity share swap and other details and the whole process therefore would require another three to six months.

Nageswara Rao also said that initially when both the entities become banks, these would maintain difference in functioning "" in the sense that the bank would focus on retail activities while IDBI Ltd would focus on corporate lending and project financing.

Sources also said that provision in the Banking Act provides that IDBI Bank has to be merged with IDBI Ltd and reverse merger therefore was being ruled out.

Meanwhile, Gautam Gan, regional manager "" eastern and western India, said that the bank would shortly open another 30 ATMs and would also focus on corporate banking.

The bank's latest expansion drive covers tier-III markets such as Moradabad, Panipat and Bikaner in north, Kolhapur, and Nasik in west, Erode, Tirupur, Kakinada and Rajahmundry in south along with Guwahati in east.