The Telegraph
Since 1st March, 1999
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Nedungadi Bank takeover to cost PNB Rs 45 crore

New Delhi, Nov. 17: The Delhi-based Punjab National Bank will have to fork out Rs 45 crore as ‘takeover-cost’ for the sick Nedungadi Bank, a senior bank official said.

“We will have to meet Nedungadi Bank’s liabilities from our own reserves when its balance sheet will be merged with us,” the official said.

The Kerala-based Nedungadi Bank has a capital base of Rs 60 crore, whereas PNB has an asset base of Rs 3,216 crore.

Financial analysts said Nedungadi’s negative net worth coupled with non-performing assets (NPA) of Rs 200 crore will hit PNB’s profits and can spell problems for the bank which is already straddled with NPAs of around Rs 2,000 crore.

Earlier this week, the Reserve Bank of India had ratified the merger draft-scheme between Nedungadi Bank and Punjab National Bank. The RBI approval boosted Nedungadi’s stock, which is currently trading at Rs 17.50 up from Rs 14.8, while PNB’s stock dipped by around 50 paise to Rs 41.35.

The apex bank had forwarded the draft scheme to both banks and asked for their comments, suggestions or objections on the merger issue before November 30. Both PNB and Nedungadi Bank now need approvals from their respective boards of directors before the merger proceedings can commence.

The official said PNB would start the due-diligence-process for Nedungadi Bank after this date. Asked to comment on the time-frame for the newly-merged entity to start operations, the official said: “The Reserve Bank of India (RBI) has capped a moratorium on the bank till February 1, 2003— but we are optimistic. The merger proceedings should be through by February-end.”

Nedungadi Bank has 173 branches, of which around 100 branches are located in the state itself, whereas PNB has a network of only 20 branches out of its network of 3,864 branches and 192 ATMs. Asked if there will be a rationalisation of Nedungadi Bank’s branches, he replied in the affirmative. “As part of our expansion programme, we will soon fan out in Maharashtra and Gujarat.”.

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