Expect cabinet nod for all bank mergers will happen simultaneously, says Allahabad Bank’s SS Mallikarjuna Rao

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Published: September 28, 2019 1:22:03 AM

After valuation we were thinking of diluting the stake. But in the meantime there were some developments. In February we got capital from the government and our bank came out of the RBI’s PCA framework.

It will send the recommendations to the RBI and seek its concurrence. Then it will go to alternative mechanism comprising four Cabinet ministers.

One quarter from the effective date of the proposed merger of Indian Bank and Allahabad Bank would be needed to have combined balance-sheets of the amalgamated entity, says Allahabad Bank MD and CEO SS Mallikarjuna Rao. In an interview with FE’s Mithun Dasgupta, Rao says decisions on diluting his bank’s equity stake in Universal Sompo General Insurance would be taken during the amalgamation process. Excerpts:

What has been the progress on the Allahabad Bank-Indian Bank merger so far?

The boards of directors of the two banks have accorded their in-principle approvals for the amalgamation. Now, the Department of Financial Services has some formalities. It will send the recommendations to the RBI and seek its concurrence. Then it will go to alternative mechanism comprising four Cabinet ministers. Once they clear it, there will be Cabinet nod and gazette notification.

Will the Cabinet approval for all the bank mergers be happening simultaneously?

I expect it will happen simultaneously. I am not expecting the Cabinet approvals to be different for different bank mergers. I am expecting the Cabinet nod will come by October 31. For Bank of Baroda, Vijaya Bank and Dena Bank merger, the gazette notification was given in September 2018, while the effective date was April 1, 2019. What the effective date would be for the merger of 10 public sector banks, we cannot guess. But then at least sufficient time will be there.

For the Indian Bank-Allahabad Bank merger, when do you expect the merged entity to have combined balance-sheets?

It will depend on the record date. For the Bank of Baroda merger, as the effective date was April 1, 2019, on March 31 balance-sheets for all the three banks were different. For this three-way merger, there was a combined balance sheet on June 30, 2019. In the present case, if the government declares the effective date January 31, 2020, balance sheets for March 31, 2020 will be combined. If the government declares the effective date April 1, 2020, we will have combined balance-sheets on June 30. It will depend on how the government will take the date.

Allahabad Bank has been looking to raise capital via dilution of its equity stake in Universal Sompo General Insurance this fiscal. What is the progress on this front?

We wanted to do it prior to March 31, 2019. But we could not take it forward for want of various formalities, including valuation based on March 31, 2019. After valuation we were thinking of diluting the stake. But in the meantime there were some developments. In February we got capital from the government and our bank came out of the RBI’s PCA framework. In August, the decision of amalgamation with Indian Bank came. As a result, our stake ownership will be a combined ownership in the days to come. So, continuing these changes, at this point of time we are holding back on this particular stake sale. We hold 28% stake in Universal Sompo, while Indian Overseas Bank holds 18%. Regarding Universal Sompo, we will discuss whatever status of our decision only during the amalgamation process.

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