New Delhi, Jan. 30: The governing bodies of both state-run Punjab National Bank and term-lender IFCI Ltd today decided to merge into a single entity in line with the government’s plans.

At a board meeting held in Mumbai, Punjab National Bank (PNB) today decided to acquire ailing IFCI and said it would soon start due diligence of the financial institution.

“We will soon appoint a chartered accountant firm and the due diligence programme will start within the next 10 days,” said S.S. Kohli, chairman and managing director of the bank.

The board of IFCI also held a meeting in the capital and cleared the merger with PNB. With the resignation of chairman V.P. Singh, IFCI officials said the term lender’s day-to-day management would now be run by its two executive directors.

Earlier this month, the government had announced that it would merge IFCI with a state-run bank as a final bailout measure.

IFCI, set up in 1948, is the country’s first financial institution established to provide credit to medium and large industry.

However, a depressed capital market in the mid-1990s and a change in the operating environment for term lenders due to the lower interest regime undermined IFCI’s operations.

IFCI today reported a lower operational loss of Rs 231.9 crore in the first nine months of this financial year as against Rs 275.7 crore in the year-ago period.

Punjab National Bank, on the other hand, has posted a 37.3 per cent rise in net profit at Rs 259.8 crore for the third quarter ended December 2003 compared with Rs 189.25 crore in the year-ago period. Total income increased to Rs Rs 2362.33 crore as against Rs 2108.38 crore in the previous fiscal period.

Stock market trackers were apprehensive about the impact the merger would have on the PNB scrip. The merger is expected to add Rs 30,000 crore to the bank’s balance sheet and also widen its presence in various segments of financial markets, including debt finance.

The market, however, chose to ignore the good third quarter results of the Delhi-based bank. This resulted in the PNB share finishing with a sharp loss of Rs 18.65 to Rs 257.30 after it had opened at Rs 279 and shot to a day’s high of Rs 280.90.

The IFCI scrip ended at Rs 18.05 after beginning at Rs 18.60 and rising to a day’s high of Rs 19.70, a marginal gain over its previous close.