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RBI approves ICICI Bank, ICICI merger

The Reserve Bank of India approved on Friday the merger between financial services major ICICI Ltd and ICICI Bank, paving the way for the creation of the country's largest private-sector bank, with Rs 1 trillion ($20.4 billion) in assets.

"After obtaining the approval of other regulatory agencies as required, the Reserve Bank has approved the merger," the RBI said in a statement, adding the approval was subject to certain conditions.

The merged entity, to be called ICICI Bank, will have to comply with cash reserve requirements and statutory liquidity reserve requirements, including liabilities pertaining to ICICI from the date of merger, the RBI said.

ICICI officials said the merger will be made effective from March 30, 2002.

The central bank also said the merged entity will have to comply with capital adequacy, asset classification income recognition and provisioning requirements.

Earlier in the month, the Bombay high court had set aside objections by some of ICICI's minority shareholders and cleared the swap ratio for the merger.

The minority shareholders had argued that the ratio of two ICICI shares for each ICICI Bank share was skewed in favour of the bank's shareholders.

In October, the New York Stock Exchange-listed ICICI decided to merge with ICICI Bank, the bank it founded eight years ago, to create India's first universal bank, or a bank offering all financial services under one roof, and the country' second-largest commercial bank.

State-run State Bank of India, which had assets of Rs 3.16 trillion at the end of March, 2001, and over 9,000 branches, is the only bank bigger in size.

But analysts expect competition in the sector to increase as ICICI Bank has superior technology and a head-start in retail lending.

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