Mumbai, Oct. 5: The boards of Federal Bank Limited and Lord Krishna Bank Limited have decided to walk the aisle for a proposed merger, giving an “in principle approval” today for the same.

However, the amalgamation of the two Kerala-based private banks is subject to due diligence, valuations and necessary approvals from their shareholders and the concerned authorities.

Anyway, the merger process will be completed in four weeks time, said sources.

Following the announcement of the merger, Federal Bank shares gained Re 1.05 paise to Rs 195.65 on the bourses on Wednesday. The other bank is not listed on the stock exchanges.

Federal Bank has appointed a committee “for obtaining and arriving at a valuation of the bank and evaluating the consideration for the merger of LKB”, Federal Bank said in a notice to the stock exchanges.

Lord Krishna Bank was founded in 1940 in the quaint hamlet of Kodungallur in Trichur district of Kerala. The Kochi-based bank is reportedly valued at Rs 300 crore now.

The seeds of its expansion were sown in the 1960s when three commercial banks were merged with it. Today, Lord Krishna Bank has a nation-wide network of 112 branches. With a core value of providing personalised customer services, it has transformed itself into a modern, completely computerised, bank.

Federal Bank, on the other hand, has a history of 75 years. It has also built up a reputation of being an agile, IT savvy and customer-friendly bank and has a nation-wide presence with 456 branches. It also has a strong franchise network in retail banking, NRI businesses and small and medium enterprises segment.

Both the banks have strong foothold in southern states of the country, especially in Kerala, and have an aggregate asset base of Rs 19,300 crore. The proposed merger will combine the strengths of the two.

A couple of years ago, Lord Krishna Bank was faced with a crisis when its main shareholder Ashwini Puri, who once controlled a 65 per cent stake in the bank, was murdered in a luxury hotel in Luanda, the capital of Angola.

He went there to set up a factory in collaboration with the Angolan government to manufacture leather shoes for the country’s armed forces under the banner of his business group ? Mohan Exports.

Mohan Puri, his son, took over the reins. He is expected to retain a 10 per cent share in the merged entity.