Bharat Overseas not keen on merging with IOB

A senior official of Bharat Overseas Bank today said it was considering a merger with a small bank. "Banks such as Federal Bank and Bank of Rajasthan would be the right fit for BhOB to merge," he said.

Even though Indian Overseas Bank (IOB) is one of the original promoters of the bank, it is a relatively large bank and, hence, BhOB did not want to be absorbed by it, added the official.

BhOB chairman G Krishna Murthy said BhOB's asset base was less than Rs 5,000 crore compared with IOB's asset base of Rs 25,000 crore. "A merger with IOB will not benefit BhOB, but BhOB will stand to gain if it merges with banks such as Federal Bank or Bank of Rajasthan," he said.

IOB holds 30 per cent stake in BhOB. The other shareholders of BhOB are Bank of Rajasthan (16 per cent), ING Vysya Bank (14.66 per cent), Federal Bank (10.67 per cent), Karur Vysya Bank (10 per cent), South Indian Bank (10 per cent) and Karnataka Bank (8.67 per cent).

BhOB is awaiting Reserve Bank of India's approval for its proposed initial public offer. The bank initially planned to tap the market in October itself.

Bharat Overseas plans to raise about Rs 100 crore to increase its net worth to Rs 300 crore from Rs 198.38 crore as on March 31, 2005.

RBI has stipulated that all private sector banks should have equity capital of Rs 300 crore and till this level is achieved, these banks must have a minimum net worth of Rs 300 crore all the time.