IIBI may be merged with Allahabad Bank

Industrial Investment Bank of India (IIBI) is likely to be merged with the Kolkata-based Allahabad Bank.

The central government had earlier indicated that IIBI should be acquired by a bank, preferably from the public sector. It has also agreed to infuse Rs 143 crore into IIBI to clean up its balance sheet.

Sources close to the development said there were concrete indications from the government that the development financial institution will be merged with the Kolkata-based bank.

The former chairman of IIBI and United Bank of India, Madhukar (he retired as IIBI chairman on February 29), has said that IIBI was a strong candidate for an M&A deal.

It should be merged with one of the three Kolkata-based banks as the entities had a strong presence in eastern region.

"IIBI should be taken over by an organisation wanting to develop and grow in this part of the country," he said.

But O N Singh, the current chairman and managing director of Allahabad Bank, denies any such development. Following Madhukar's retirement, Singh, the present chairman of Allahabad Bank, has taken over as IIBI chairman.

Madhukar said IIBI was set up as Industrial Reconstruction Bank of India, a vehicle to take over assets of sick companies.

It had run into problems, but with financial re-engineering and better deployment of funds, was now in better shape.

"We have recorded a surplus of Rs 2 crore in the third quarter "" overheads were around Rs 6 crore, while income was Rs 8 crore," he said.

IIBI had floated a voluntary retirement scheme. It had attracted around 50 applications and 20 more were expected before the scheme closed. IIBI had around 265 employees at last count.

Talking about non-performing assets, Madhukar said till date IIBI had recovered Rs 53 crore of bad assets against Rs 35 crore achieved in the last fiscal.

The employees of IIBI had demanded merger of IIBI with Industrial Development Bank of India (IDBI) and had also made a representation to the central government demanding this.

IIBI was the last of the series of DFIs that remained to be either merged with another bank or be itself turned into an banking entity.