The board of state-owned Indian Bank on Wednesday approved the merger with Allahabad Bank and capital infusion of up to Rs 5,000 crore.
"The board of directors in its meeting held today approved the capital infusion of up to Rs 5,000 crore through preferential allotment to government, subjected to necessary regulatory approvals," Indian Bank said in a filing to the Bombay Stock Exchange.
Earlier on Monday, Allahabad Bank's board had also approved the merger proposal with Indian Bank, to make the amalgamated entity the seventh-largest public sector lender of the country.
This is a part of Finance Minister Nirmala Sitharaman's announcement of a mega bank merger plan last month, which envisages the merger of 10 public sector banks into four entities, bringing down the number of state-run banks to 12.
The merger of Indian Bank and Allahabad Bank will create a robust entity with a pan-India presence. As of now, Indian Bank, the anchor bank in this merger, has a strong presence in South India whereas Allahabad Bank is present in northern and eastern India.
The merged entity will emerge as the seventh-largest public sector bank with a business of Rs 8.08 lakh crore (approx 1.9 times of pre-merged Indian Bank) and will have a nationwide presence spread over 6,100 branches with about 43,000 employees.
"The proposed merger will create a robust entity with a Pan-India presence. Indian Bank, the anchor bank in this merger, enjoys a strong presence in Southern India while Allahabad Bank has cemented its position in the northern and eastern parts of the country," Business Standard quoted Indian Bank MD & CEO Padmaja Chunduru as saying this.
"Further, the merger will lead to the emergence of a strong globally-focused bank with a cumulative experience of over 266 years (Indian Bank is in existence for 112 years whereas Allahabad Bank is a 154-year-old Bank)," she said.
Following the announcement, shares of Indian Bank closed trade at Rs 158.85 apiece, down 0.19 per cent, on the BSE on Wednesday.
Edited by Chitranjan Kumar