Mumbai, April 26 :    Mumbai, April 26:  The Reserve Bank of India (RBI) today approved the merger of ICICI with ICICI Bank with some relaxation in areas of priority sector lending and equity investments for the combined entity. The merger will be effective from March 30. The process, set in motion in October last year, will create the country's second largest bank after State Bank of India (SBI). It will have assets of over Rs 1,00,000 crore. SBI, on the other hand, has assets of over Rs 3,00,000 crore. The approval paves the way for ICICI to work towards its stated goal of becoming the country's first universal bank. The merger application was made on October 25, 2001. The merged entity, to be known as ICICI Bank, will be headed by K. Vaman Kamath, the 53-year-old chief executive and managing director of ICICI. Narayan Vaghul will be its chairman. Though the entity would trail SBI in the number of branches, analysts said it would be strong on cross-selling products and technology. The concessions include more time to conform to priority sector lending norms. Since ICICI did not have to lend a minimum fraction of its funds to the sector, the merged bank would have to set aside 50 per cent of its 'incremental advances' for priority sector lending. Under the existing norms, a bank must provide at least 40 per cent of its total credit to the sector. The additional 10 per cent will have to be lent until the aggregate priority sector advances increase to 40 per cent of the total net bank credit of the merged bank. Analysts say this is something that could put the bank's profits under pressure, at least in the short term. ICICI Bank was also given more room for equity investment. Investments of ICICI acquired by way of project finance on date of the merger would be kept outside the 5 per cent cap on funds that can be poured into and equity-linked instruments for a period of five years. This will prevent any adverse effect on viability or expansion. However, such instruments will have to be marked to market, and provisions made for any loss in a manner prescribed for investments of the bank. 'Any incremental accretion to the above project-finance category of equity investment will be reckoned within the 5 per cent ceiling for equity exposure of the bank,' the RBI said. The approval for the merger sent spirits soaring at the ICICI headquarters. 'We are delighted that we have been able to obtain regulatory and statutory approvals for the merger within six months,' K. V. Kamath, managing director and CEO of ICICI Bank, said.