BCB set to merge with BoB

Bank of Baroda has already received the in-principle clearance of the Reserve Bank of India for the amalgamation of its subsidiary with the parent bank. The merger is likely to be effective from April 1, 1998, sources say. The bank has appointed SBI Caps for valuation of Bareilly Corporation Bank8217;s assets and the share swap ratio is likely to be fixed at 15 shares of Bareilly Corporation Bank for oneBank of Baroda share.

The merger will, however, involve transfer and issuance of shares or payment of cash up to 2 per cent of the shares of Bareilly Corporation Bank since Bank of Baroda is holding 98 per cent of the equity of Rs 5.16 crore of the bank while the remaining 2 per cent is held by the public. Its reserves stood at Rs 1.32 crore.

Bank of Baroda officials said the merger will enable it to strengthen the base of its branch network in areas of western Uttar Pradesh where Bareilly Corporation Bank has 63 branches with a staff strength of 861 employees. BCB currently has a deposit base of Rs 307 crore and an asset base of Rs 344 crore. The bank has posted a net profit of Rs 94.05 lakh in 1997-98. In the previous fiscal year, its net profit stood at Rs 25 lakh. Despite posting net profit in two successive years, the bank has accumulated a loss of Rs 3 crore.

Bareilly Corporation Bank8217;s capital adequacy ratio is pegged at an abysmally low level of 3 per cent as against the RBI stipulated CAR of 8per cent. Bank of Baroda has, however, recently issued a comfort letter saying it would take care of the shortfall in the bank8217;s capital adequacy ratio by bringing in funds. There will not be any moratorium on the activities of Bareilly Corporation Bank following the merger.