The Hindu : Business : Federal Bank set to absorb Ganesh Bank

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Tuesday, Jan 10, 2006

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Federal Bank set to absorb Ganesh Bank

Special Correspondent

Draft scheme provides for full payment to depositors RBI draft plan offers full payment to depositors

Ganesh Bank employees should continue in service Federal Bank has option of integrating branches of Ganesh Bank

MUMBAI: The Reserve Bank of India (RBI) on Monday has placed in the public domain a draft scheme of amalgamation of Ganesh Bank of Kurundwad Ltd, Maharashtra, with Kerala based Federal Bank Ltd. The RBI has invited suggestions and comments from members of the public, including the banks' shareholders, depositors and creditors on the draft scheme.

"The draft scheme has also been sent to both banks. Both banks have been given two weeks' time, up to January 21, to consider the draft scheme. The RBI will take a view on the future set-up of Ganesh Bank soon thereafter,'' the RBI stated in a press release.

Ganesh Bank of Kurundwad was placed under an order of moratorium on January 7. The order is effective up to April 6 or an earlier date if alternative arrangements are in place. The RBI was to decide the future set-up of Ganesh Bank of Kurundwad during the period of moratorium.

Inability to raise capital

"Ganesh Bank of Kurundwad was taken under moratorium after being given time to arrange for infusion of capital as also to explore other options for its future set-up. Due to the continued inability of Ganesh Bank to raise the required capital, the RBI had to exercise the option of compulsory merger available to it under Sec. 45 of the Banking Regulation Act, 1949,'' the RBI stated.

The central bank further stated that it received expression of interest from Federal Bank in taking over Ganesh Bank of Kurundwad. "Federal Bank has, among other things, proposed to pay the depositors fully.

The RBI has examined the proposal received from Federal Bank, keeping in view its financial parameters, retail network and synergies as well as strategic advantages. Taking into account the interest of depositors of Ganesh Bank of Kurundwad as well as the bank's strengths and weaknesses, the RBI has prepared a draft scheme of amalgamation of Ganesh Bank of Kurundwad with Federal Bank.''

According to the draft amalgamation scheme, all employees of Ganesh Bank should continue in service and be deemed to have been appointed in Federal Bank at the same remuneration and on the same terms and conditions of service, as were applicable to Ganesh Bank employees immediately before the close of business on January 7.

Federal Bank also had the option of integrating branches of Ganesh Bank according to its convenience and may close down or shift the existing loss making branches of Ganesh Bank.

However, this option would be exercised by Federal Bank with prior approval of the RBI within one year.

Our Kochi correspondent writes:

Good fit: Fed Bank chief

The Chairman of the Aluva-based Federal Bank, Venugopalan, has termed the proposed scheme of amalgamation of the Kolhapur-based Ganesh Bank of Kurundwad with the bank as a "good fit".

Talking to The Hindu, Mr. Venugopalan said the bank had a presence in interior parts of Maharashtra, which would give a better presence for Federal Bank in the western region.

At present, Federal Bank has 20 branches in Maharashtra but this will go up with the amalgamation of Ganesh Bank, which has eight rural branches, 13 semi-rural branches, nine urban branches and three branches in the metro.

Ganesh Bank has deposits worth Rs. 200 crore and advances Rs. 100 crore.

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