Calcutta, Sept. 2: Kurundwad-based Ganesh Bank has been officially merged with Federal Bank. According to a government notification, all the branches of Ganesh Bank of Kurundwad will function as branches of Federal Bank from today.

The government had placed the 32-branch Ganesh Bank under a moratorium for four months beginning January 7 this year as the bank’s networth turned negative (Rs 3.05 crore) by March 31, 2005. Its net non-performing assets shot up to 8.04 per cent and capital adequacy ratio became negative at 5.83 per cent. The promoters of the bank also failed to come up with any capital injection plan.

It is at this time that the Federal Bank proposed to take over the ailing family-promoted bank. On January 24, the government had approved a scheme of amalgamation of Ganesh Bank with Federal Bank.

But Ganesh Bank’s chairman and others challenged the government’s moratorium and subsequent merger decision in Bombay High Court. The high court stayed the merger move and extended the moratorium till April 27.

Meanwhile, the petitioners moved the Supreme Court on the issue and the apex court in its judgment on August 28 brought into force the scheme of amalgamation.

Following that the government issued a notification validating the merger of Ganesh Bank of Kurundwad with Federal Bank with effect from September 2.

“Customers, including depositors of the Ganesh Bank of Kurundwad, will be able to operate their accounts as customers of Federal Bank with effect from September 2, 2006,” the notice said.

The Federal Bank is making all necessary arrangements to ensure a smooth flow of services to the customers of Ganesh Bank, said a Federal Bank official.

During the moratorium period, customers of the Ganesh Bank of Kurundwad were not allowed to withdraw more than Rs 10,000 from their accounts in the bank.

However, the ceiling will now stand removed and customers can withdraw and deposit in their accounts any amount they want to.

As on March 31 last year, Ganesh Bank’s total deposits stood at Rs 217.4 crore and advances at Rs 105.7 crore.

According to the scheme of amalgamation, Federal Bank will not pay any upfront money to Ganesh Bank promoters or shareholders.

Instead, the Kerala-based bank will repay all the liabilities of the bank, including deposits, and “if any surplus remains after meeting all the liabilities out of the realisation of the assets of Ganesh Bank, the shareholders may receive pro-rata payments”.