Mumbai: The boards of directors of Centurion Bank of Punjab Limited and Lord Krishna Bank Limited today approved the merger of Lord Krishna Bank with Centurion Bank of Punjab.

The proposal is subject to all the requisite statutory, regulatory and shareholder approvals, including the approval of the Reserve Bank of India.

Rana Talwar will be the chairman and Shailendra Bhandari the managing director and CEO of the merged entity. It is proposed that Mohan Puri would join the board of Centurion Bank of Punjab, subject to regulatory approvals.

The independent valuers appointed jointly by both banks to determine the swap ratio for the merger, Deloitte Haskins & Sells and N M Raiji & Co have worked out the share swap ratio, which has been fixed at 5:7 ie. for every five shares of Lord Krishna Bank, its shareholders will receive seven shares of Centurion Bank of Punjab.

Centurion Bank of Punjab proposes to issue 75 million fully paid up equity shares at Rs24.54 per equity share for Rs184.05 crore to India Advantage Fund V and 95 million fully paid up equity shares at Rs25 per equity share for Rs 237 crore to Bank Muscat (S A O G).

The additional capital raised will enable the bank to maintain a strong capital position post merger and provide the support and drive that the bank requires to ensure accelerated growth over the following quarters.

Ambit Corporate Finance and DSP Merrill Lynch are the advisors to Centurion Bank of Punjab and Lord Krishna Bank respectively.

"The proposed merger with Lord Krishna Bank firmly establishes Centurion Bank of Punjab's role as an industry consolidator," says Rana Talwar, chairman, Centurion Bank of Punjab. "The merger of Bank of Punjab with the erstwhile Centurion Bank has been an unqualified success, we are confident that the proposed merger will accelerate the Bank's growth momentum and help it move towards becoming the best full service bank in the country".

According to Mohan Puri, Director, Lord Krishna Bank, "The proposed merger is in the best interests of all the stake holders i.e. customers, employees and shareholders as all of them would greatly benefit from being part of a larger, rapidly growing bank. Centurion Bank of Punjab is fully committed to look after employees' interest, which was one of the key considerations while choosing the merger partner."

As part of the integration of both banks, it is envisaged that there will be no retrenchment of staff of either bank and there will be no closure of any rural branches. Additionally, the scheme of amalgamation provides for a one-time increment to all existing employees of Lord Krishna Bank.

Centurion Bank of Punjab will have an extraordinary general meeting (EGM) of its shareholders on September 30, 2006, the date on which Lord Krishna Bank has scheduled its AGM, and both banks will seek approvals for the merger from their respective shareholders at these meetings.

The board of directors of Centurion Bank of Punjab has also approved a proposal to raise additional capital through a preferential issue of fresh equity. This approval is subject to shareholder, regulatory and statutory approvals as applicable.

New generation private sector Centurion Bank of Punjab was formed with the merger of Centurion Bank and Bank of Punjab in 2005.

The Cochin-headquartered Lord Krishna Bank is a leading old private sector bank, which has transformed itself from a regional bank to a pan-India bank with a branch network of 112 branches and 44 ATMs. It has emerged as a modern, completely computerized, technology driven entity that is redefining relationship banking with its customers and focusing on retail and SME banking.