RBI delaying HDFC Bank, TimesBank merger

RBI delaying HDFC Bank, TimesBank merger
DEV CHATTERJEE

MUMBAI, DECEMBER 31: There Reserve Bank of India (RBI) is delaying the merger of HDFC Bank with Times Bank which was to come into effect from December 1, 1999. Instead, the RBI has asked both banks to furnish more details on the proposed merger.

``The RBI is still looking into it... we hope that before the end of current fiscal they will be able to clear it,'' HDFC Bank managing director, Aditya Puri told this newspaper on Thursday. ``These (RBI's enquiries) are pure technicalities, the RBI seeks more information which we are providing,'' Puri added.

An extra-ordinary general meeting (EGM) of HDFC Bank shareholders is expected to clear the merger on Saturday. A new date for the proposed merger will be announced later.

``The formal merger will take some more time as RBI is still looking into various aspects of the merger,'' he added. The HDFC Bank and TimesBank merger is the first among the new generation private sector banks and shook the entire banking sector. Post-merger, the banking license of TimesBank was to be surrendered back to the RBI.

According to Deepak Parekh, chairman HDFC Bank, TimesBank was to be merged with HDFC Bank under Section 44A of the Banking Regulation Act, "which means that a High Court approval is not required". The RBI is also looking at this angle, RBI officials said.

Puri said a suit filed by two shareholders against the preferential allotment to promoters will be "properly answered" in the Ahmedabad High Court by the bank. "The entire merger has been done as per Sebi guidelines... we are transparent," Puri added. "Shareholders have only gained, if we look at various advantages due to the merger," he said.

The share prices of both banks had spurted on the bourses even before the deal was announced formally as the rumours of proposed merger had already trickled into the markets.

Meanwhile, a husband and wife team, Suresh Parekh and Nilaben Parekh filed a civil suit objecting to the preferential issue to main institutional shareholders and that their stake in the bankremains unchanged after the amalgamation of Times Bank with it.

The shareholders have taken exception to the proposed preferential allotment to a certain category of shareholders, including the bank's principal promoter, Housing Development Finance Corporation (HDFC). The court has sent a copy of the suit to HDFC Bank seeking clarifications on the objections raised by the petitioners and fixed the next hearing on January 17, 2000.

HDFC Bank has proposed a preferential issue of 1.98 crore shares at a price of Rs 94 per share to its main promoters HDFC and US-based Chase Bank's affiliates India Private Equity Fund and Indocean Financial Holdings Ltd.

HDFC has just over 29 per cent while the other two strategic partners together hold about 15 per cent equity in HDFC Bank. The merger is to come into effect from December 1. Under the proposed scheme, shareholders of TimesBank will receive one share of HDFC Bank for every 5.75 shares of TimesBank.