Bank of Rajasthan to Merge with ICICI Bank Under RBI's Mandate

Strategic Insights -

The Bank of Rajasthan (BoR), a lender with a chequered history, is on the verge of a significant transformation. G. Padmanabhan, a chief general manager at State Bank of India, was appointed by the banking regulator to head BoR for a two-year term. His mandate is to clean up the lender's mess and address critical issues of corporate governance. The bank is expected to merge with ICICI Bank Ltd, India's largest private sector lender, with the board set to clear the merger proposal next Sunday. According to the proposal, ICICI Bank will offer 25 of its shares for every 118 of BoR. This move comes after a series of breaches and irregularities, including allegations of fraudulent trade practices and takeover norms violations.

Key Takeaways:

  • G. Padmanabhan, a chief general manager at State Bank of India, was appointed by the banking regulator to head Bank of Rajasthan (BoR) for a two-year term.
  • The bank is expected to merge with ICICI Bank Ltd, with the board set to clear the merger proposal next Sunday.
  • ICICI Bank will offer 25 of its shares for every 118 of BoR after the valuation report is reviewed.
  • BoR has a chequered history, with a founding in 1943 by the Mansingka brothers of Bhilwara with an initial capital of Rs10 lakh.
  • Pravin Kumar Tayal, the promoter, has been under pressure to give up control of BoR for quite some time now, despite owning 55.01% of the bank.
  • RBI penalized BoR in February for breaches such as irregularities in the conduct of accounts of a corporate group and failure to provide certain documents sought by it.
  • Special audits on the bank were ordered by RBI, including by Deloitte Haskins and Sells on lending policy and Deloitte Touche Tohmatsu on information security system.
  • A Sebi probe into share transactions in BoR between June 2007 and December 2009 revealed that the Tayal group gave funds to other groups to buy BoR shares, increasing the promoters' holding to 55.01% by December 2009.

Statistics:

  • Initial capital of BoR: Rs10 lakh
  • Promoters' holding in BoR: 55.01% (as of December 2009)
  • ICICI Bank's proposed shares per BoR share: 25 for every 118
  • RBI's sanction for BoR's breaches: February
  • Auditors for special audits: Deloitte Haskins and Sells and Deloitte Touche Tohmatsu

Sources:

  • Euclid Infotech Pvt. Ltd.
  • Syndigate.info
  • Albawaba.com