Upcoming merger: Allahabad Bank puts property sales on hold

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Published: October 2, 2019 1:48:59 AM

Rao said the bank has already restructured loans of Rs 285 crore and further identified Rs 200 crore to stressed MSMEs under the RBI’s debt recast scheme during FY20. The bank’s total exposure to the MSME sector stands at around Rs 27,000 crore.

Also, according to the insurance regulator’s norms, one bank cannot own or promote more than one insurance company.

Allahabad Bank is currently holding back on its proposed sales of properties, including one in Mumbai’s Pedder Road, on the back of absence of good market response and its upcoming merger with Indian Bank. Talking to FE, Allahabad Bank MD and CEO SS Mallikarjuna Rao said, “Both banks have good numbers of properties. So, we will decide it (sale) during the amalgamation process.”
The proposed merger of Kolkata-headquartered Allahabad Bank and Chennai-based Indian Bank will make the merged entity the country’s seventh largest bank. Boards of directors of the two banks have already accorded their in-principle approvals for the amalgamation.

On the bank not going ahead with the sale of its properties to raise capital, Rao said, “The response was not on the expected line because real estate was not doing well, and our values (for properties) are better whereas the offers were lesser. So, we did not want to make it distress sales. That is the reason why we kept that pending.”

FE has earlier reported that Allahabad Bank is holding back on its planned dilution of equity stake in Universal Sompo General Insurance at this point of time as its stake ownership in the general insurer will be a combined ownership due to the proposed merger. Thus, decisions on diluting the bank’s equity stake would be taken during the amalgamation process.

“We will be understanding from them (Indian Bank) whether they have any bancassurance arrangement and in the combined entity will it go beyond the limit prescribed under Irdai norms,” Rao explained. Irdai does not allow a bank to have more than three bancassurance tie-ups in general insurance segment. Also, according to the insurance regulator’s norms, one bank cannot own or promote more than one insurance company.

Rao informed around 20 independent committees on all major activities, including corporate credit, retail assets, IT and HR, have been formed jointly by Indian Bank and Allahabad Bank so that pre-amalgamation activity can be property handled. “Now these committees will start working. The committee members from both the sides will start communicating each other and identify the documents for synchronisation and take it forward,” he said.

Rao said the bank has already restructured loans of Rs 285 crore and further identified Rs 200 crore to stressed MSMEs under the RBI’s debt recast scheme during FY20. The bank’s total exposure to the MSME sector stands at around Rs 27,000 crore.

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