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Bank of Baroda to take over Benares State Bank

Tamal Bandyopadhyay

Bank of Baroda is set to take over the beleaguered Benares State Bank Ltd. The board of the listed public sector bank passed a resolution on merging or amalgamating the Uttar Pradesh-based private sector bank on Wednesday.

BoB chairman PS Shenoy was not available for comment. However, highly placed sources confirmed that Benares State Bank would be merged with the public sector bank.

The Reserve Bank of India is drawing up the scheme of amalgamation under Section 45 of the Banking Regulation Act. This will be sent to the finance ministry soon.

In the run-up to the amalgamation, the bank will be put under a moratorium. On September 25, the RBI issued a directive under Section 35A of the BR Act banning withdrawal of deposits of over Rs 1,000 from the bank. This was subsequently relaxed allowing withdrawals of up to Rs 2,500.

BoB will gain 105 branches across the country following this merger. It now has a branch network of over 2,500. As on March 31, 2001, on a deposit liability of Rs 539.85 billion, BoB had an advance portfolio of Rs 274.20 billion and an investment portfolio of Rs 198.57 billion.

Its asset base is Rs 624.62 billion. In contrast, Benares State Bank has assets worth Rs 11.34 billion. In March 2001, its deposit liability was to the tune of Rs 10.31 billion, advances Rs 2.30 billion and investments Rs 6.31 billion.

On an authorised capital of Rs 1.20 billion, the bank has a paid-up capital of Rs 620 million which has been wiped out by accumulated losses of Rs 799.6 million in 2000-01. It posted a net loss of Rs 133.8 million last year.

The proposed merger of the insolvent old private bank, promoted by the Maharaja of Benares, will bring down the curtains on the political drama that was enacted in New Delhi over the last few weeks.

The government was reportedly in favour of liquidating the bank. In fact, acting on a routine RBI report, the Centre had earlier directed the RBI to initiate liquidation proceedings.

RBI deputy governor G Muniappan discussed the issue with minister of state for finance VK Patil. Subsequently, the Centre changed its tack in view of the forthcoming Uttar Pradesh Assembly elections.

Benares State Bank will be the second UP-based bank to be merged with BoB over the last few years. Two years ago, Bareilley Corporation Bank was merged with BoB. Benares State Bank is also the third UP-based bank to be merged with state run banks over the last one decade.

The other two are Hindustan Commercial Bank (merged with Punjab National Bank) and Kashinath State Bank (merged with State Bank of India).

Erstwhile South Indian takeover tycoon Rajarathinam and Union Bank of India hold stakes in this bank. In 1964, Bareilli Bank Ltd with seven branches was merged with Benares State Bank. It also took over Lucknow Bank Ltd in 1968.

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