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ICICI mulls merger with Sangli Bank

Mumbai, Dec. 8: The board of ICICI Bank will meet tomorrow to consider the merger of unlisted Sangli Bank with itself to boost its rural presence.

Sangli Bank, which has a network of 186 branches in seven states, is present in some rural and semi-urban areas of Maharashtra. Banking circles estimate the ICICI Bank-Sangli Bank deal to be around Rs 350 crore.

Though ICICI Bank’s bid for the Satara-based United Western Bank (UWB) failed when IDBI bagged it in September, its interest in Sangli Bank is in keeping with its focus on rural and international banking, analysts said.

Recently, ICICI Bank got the Reserve Bank of India’s (RBI) approval to open more branches and the acquisition of Sangli Bank is expected to boost its rural presence.

Analysts feel there will be more such deals in the coming months as private sector banks look at targets with an established network to boost their presence in the country.

ICICI Bank’s interest in Sangli Bank comes at an opportune time. The central bank had imposed restrictions on Sangli Bank because of its precarious capital condition.

The bank was refrained from raising the lending exposure, going for large deposits or opening more branches. Reports said this came after the bank’s capital adequacy ratio (CAR) fell to 1.64 per cent in March 2006 from 9.30 per cent last year.

It was also speculated that Sangli Bank may meet the same fate as that of UWB and that it could be placed under a moratorium.

Sangli Bank was set up in 1916 by the king of Sangli state to provide personal and business banking facilities to the people of the region. The bank is considered as one of the oldest private sector banks in the country.

Between 1955 and 1965, close to seven banks were merged with Sangli Bank. These included Saraf Bank of Kolhapur, Bank of Poona, Poona Investors Bank, Phaltan Bank Ltd, Guru Govind Specie Bank, United Bank of Karnataka and Union Bank of Bijapur and Solapur.

For the year ended March 31, 2006, its gross non-performing assets (NPAs) declined to 4.30 per cent from close to 9 per cent in the previous year.

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