Mumbai, Nov. 16: The Reserve Bank of India (RBI) and the Securities and Exchange Board of India (Sebi) today dashed the expectations of Nedungadi Bank shareholders reaping gains on account of Punjab National Bank (PNB) amalgamating Nedungadi Bank with itself. The two apex bodies clarified that the draft scheme of amalgamation of Nedungadi Bank with PNB does not envisage allotment of shares of the latter to shareholders of the Kerala-based entity.

As per the draft scheme, RBI clarified that PNB would first evaluate the assets and determine the liabilities of Nedungadi Bank and on completion of this exercise, PNB would pay the depositors and creditors to the extent of their balances.

The shareholders of Nedungadi Bank would be entitled for payment of pro-rata value of shares only if any surplus remained after paying off the depositors and creditors, RBI said said in a statement.

Sebi also said in a statement that the proposed merger of Nedungadi Bank with PNB was exempted from the applicability of Regulations 10, 11 and 12 of its takeover code and consequently, there would not be any public announcement or open offer for acquisition of shares.

The statement from both regulators comes in the wake of media reports regarding price movement of shares of Nedungadi Bank ever since the scheme was notified on November 13. Nedungadi scrip then rose by 4.45 per cent to Rs 15.25 and PNB was up by 1.21 per cent at Rs 41.85 a day later. On Friday, the Nedungadi share gained Rs 2.65 to close at Rs 17.85.

On the commencement of the scheme, which has been notified by RBI, the entire amount of the paid-up capital and reserves of the Nedungadi Bank would be treated as provision for bad and doubtful debts and depreciation and other assets of the bank.

As per the merger scheme, all employees of Nedungadi Bank shall continue in service and be deemed to have been appointed in PNB at the same remuneration and on same terms and conditions of service, as were applicable immediately before the close of business on November 2, 2002. PNB would have the option of integrating branches of Nedungadi Bank according to its convenience and/or close down or shift the existing branches.