The new entity, which will come into effect from December 1, would be known as HDFC Bank, while the licence issued to TimesBank would be extinguished or surrendered back to the Reserve Bank of India, HDFC Bank chairman Deepak Parekh said after the board meeting.

Parekh said the two banks would soon apply to RBI for permission for merger and added that they would also approach their respective shareholders in extraordinary general meetings (EGM) for their approval. While HDFC Bank would have its EGM on January 1, TimesBank would hold its meeting on January 7.

HDFC Bank would make a preferential issue to its shareholders - HDFC and Chase Capital Partners - so that their stakes remain unchanged at 30 per cent after the merger. Under theIndian Banking Act, this deal would be termed as an act of amalgamation, Parekh said, adding the two banks had already broached the matter informally with the central bank. The record date for the purpose will be announced later, he said.

Under the terms of the deal, a total of 23.48 million shares of HDFC Bank will be issued, of which 17.39 million will be issued to the founders of TimesBank and 6.09 million to its public shareholders. Bennett, Coleman & Co Ltd, which holds 74 per cent stake in TimesBank, will hold around 7.5 per cent in HDFC Bank after the amalgamation, he said.

After the amalgamation, the capital of HDFC Bank will rise to Rs 223 crore from around Rs 200 crore now while the capital adequacy ratio will be 10.3 per cent. For the fiscal ended March 1999, HDFC had notched up a net profit of Rs 82 crore while TimesBank had recorded a net of Rs 27 crore. "It's a strategic fit," Parekh said of the move, adding the amalgamation would provide economies of scale and a wider customer base, whichis most critical in the banking sector.

Parekh said the amalgamated entity will have 650,000 customers, total deposits of Rs 6,827 crore, total income of Rs 772 crore and a balance sheet size of over Rs 9000 crore. "All employees of TimesBank will become employees of HDFC Bank, he said. After the preferential allotment, HDFC's stake in the bank will remain at about 30 per cent, he added. The capital adequacy ratio after the preferential allotment will rise to 11.1 per cent, he said.

Times Bank chairman SM Dutta described the amalgamation as an amicable marriage. "Times Bank growth projections required significant capital injection. As an alternate strategy, the bank's board of directors decided to join hands with an Indian bank," Dutta said. ``The distinct advantages to HDFC Bank include faster growth, lower marketing and fixed costs and the well-spread customer base," HDFC Bank managing director Aditya Puri said.

The fate of Times Bank managing director Nani Jhaveri and other members of the board ofdirectors is still uncertain and will be decided in subsequent meetings. HDFC Bank has however invited representative from the the `Times family' in the board of directors of the merged entity.