RBI okays ICICI Bank-BoR merger; takes effect today

The Reserve Bank of India (RBI) on Thursday said it had approved the proposed merger between ICICI Bank and Bank of Rajasthan (BoR).

“All branches of Bank of Rajasthan will function as branches of ICICI Bank, with effect from August 13. This is consequent upon RBI sanctioning the Scheme of Amalgamation of Bank of Rajasthan Ltd with ICICI Bank Ltd,” the banking regulator said in a statement posted on its website late Thursday evening.

On May 25, ICICI Bank and BoR announced a merger swap ratio of 1:4.72. The following weeks saw drama, with the extraordinary general meeting of BoR convened to approve the proposed merger being adjourned on a stay order from a Kolkata civil vourt.

However, some BoR shareholders put the merger to vote independently and declared the resolution passed. The stay was lifted after an order of the high court, after ICICI Bank petitioned.

However, BoR’s board had not been able to agree on the validity of the vote conducted in the absence of the bank management and had decided to forward the matter to RBI.

Employee unions of BoR are vehemently opposed to the merger.

Bank of Rajasthan had a market capitalisation of Rs 2,811 crore as of on Thursday. It reported a net loss of Rs 102.1 crore for the year ended March 31, on revenues of Rs 1,359.5 crore.

In terms of assets, ICICI Bank is around 25 times as large as BoR. In branch network, BoR with 463 branches is less than a fourth of ICICI.

The move to merge BoR with ICICI Bank came in the wake of mounting regulatory pressure on the biggest shareholder group of BoR, the Tayal family led by Pravin Kumar Tayal. While the Tayals have been under regulatory scanner for a while, pressure intensified earlier this year when Sebi accused them of misleading investors about the shareholding pattern.

In February, RBI also slapped a fine of Rs 25 lakh on the bank following violations related to KYC (know-your customer) guidelines, acquisition of immovable property, deletion of records in the bank’s information technology system, irregularities in the conduct of accounts for certain companies and for failure to present documents to the regulator. It also ordered a special audit of the books of the bank, after it found lapses in corporate governance and disclosure norms.