Mumbai, Feb. 14: The Indian Overseas Bank (IOB) board today okayed the takeover of Bharat Overseas Bank at a cost of Rs 170 crore.
IOB will buy the shares of five other banks in Bharat Overseas Bank at a price of Rs 155 per share. IOB holds a 30 per cent stake in Bharat Overseas Bank. The other banks who have stakes in the unlisted private sector bank include Bank of Rajasthan (16 per cent), ING Vysya Bank (14.66 per cent), Federal Bank (10.67 per cent), Karur Vysya Bank (10 per cent), South Indian Bank (10 per cent) and Karnataka Bank (8.67 per cent). The acquisition will take IOB’s total branch network to around 1600 in the country.
The Chennai-based Bharat Overseas Bank was established in 1973 to take over IOB’s Bangkok branch. The then Thai government had asked IOB to shut down its operations in that country after the bank was nationalised in 1969.
Bharat Overseas Bank has posted a net profit of Rs 7.07 crore for the first half of 2005-06, up 39.17 per cent from Rs 5.08 crore during the same period last year. While Bharat Overseas Bank’s asset base is Rs 3,214 crore on a capital base of Rs 15.75 crore for the year ended March 31, 2005, IOB had an asset base of Rs 50,815 crore and a capital of Rs 544.80 crore.
IOB was set up in 1937 by M.C. Chettyar and it started operations with three branches. It now has a network of over 1500 branches in the country and six overseas. The government holds 61.23 per cent in the bank. For the quarter ended December 31, the bank has posted a net profit of Rs 197.21 crore, up from Rs 161.21 crore in the corresponding period last year.
Bharat Overseas Bank was recently in the news as the RBI had slapped a penalty of Rs 20 lakh for its role in the demat scam.
The central bank said while the bank extended IPO finance to fictitious/benami individuals without appropriate due diligence to establish their identity or existence, it also provided intra-day funding of margin money to brokers. Moreover, the bank has also extended huge amounts to a group of accounts through fictitious/benami individuals violating the RBI directive on limits on funding of IPOs (which specified a limit of Rs 10 lakh per individual).
The bank’s internal control system failed to arrest the irregularities and it also did not act upon the alerts from an internal audit. It also collected account payee cheques of individuals who are not bank customers, besides crediting the proceeds of the refund orders to accounts other than those of the payees.
