MANU/DBOD/0034/2005

Ministry : Reserve Bank of India

Department / Board : Department of Banking Operations and Development

Circular No. : DBOD.No.PSBS.BC.89/16.13.100/2004-05

Date : 11.05.2005

Notification/ Circulars Referred:116/ 08.139.001/2001-02 MANU/DBOD/0040/2002 116/ 08.139.001/2001-02 MANU/DBOD/0040/2002

Referred IN

All Scheduled Commercial Banks

Guidelines for Merger /Amalgamation of Private Sector Banks

Reserve Bank of India had constituted, on the recommendations of the Joint Parliamentary Committee (2002), a Working Group to evolve guidelines for voluntary mergers involving banking companies. Based on the recommendations of the Group, the guidelines laying down the process of merger proposal, determination of swap ratios, disclosures, the stages at which Boards will get involved in the merger process and norms of buying / selling of shares by the promoters before and during the process of merger have since been finalised. The detailed guidelines are enclosed.

2. While dealing with the merger proposals between two banking companies or between a banking company and a non-banking financial company, banks may act in accordance with the enclosed guidelines. Boards of the banks have to play a crucial role in the process. It may be ensured that the decision of merger should be approved by two third majority of the total Board members and not those present alone. However, in view of the importance of the responsibility implicit in such merger decisions, it will be necessary that the directors who participate in such meetings are signatories to the Deeds of Covenants as recommended by Ganguly Working Group on Corporate Governance, forwarded to banks vide our circular DBOD.No.BC.116/ 08.139.001/2001-02 dated June 20, 2002.

3. The principles underlying the above guidelines would also be applicable as appropriate to public sector banks.

Sd/-

(Prashant Saran)

Chief General Manager

Guidelines for merger/amalgamation of private sector banks