Case Study

On
Merger of
Ganesh Bank Of Kurundwad
With
Federal Bank
By Shivam somani 11606518 (04)
About federal bank
Federal Bank Limited is a major Indian commercial bank in the private sector headquartered at Aluva, Kerala having
more than thousand branches and ATMs spread across different States in India. The Bank is a pioneer among
traditional banks in India in the area of using technology to leverage its operations and was among the first banks
in India to computerize all its branches. The Bank offer its customers, a variety of services such as Internet banking,
Mobile banking, on-line bill payment, online fee collection, depository services, Cash Management Services,
merchant banking services, insurance, mutual fund products and many more as part of its strategy to position itself
as a financial super market and to enhance customer convenience.

The history of Federal Bank dates back to the pre-independence era. The Bank was incorporated on April 23, 1931
as the Travancore Federal Bank Limited, Nedumpuram under the Travancore Companies Regulation, 1916. Late K.P.
Hormis, the visionary banker and founder took up the reigns in 1945 and built the bank a nationwide institution.
The Bank's name was changed to The Federal Bank Limited on December 2,1949. The Bank was licensed under the
Banking Regulation Act, 1949, on July 11, 1959 and became a scheduled commercial bank under the Second
Schedule of Reserve Bank of India Act, 1934 on July 20, 1970. Today the bank is present in 25 States, Delhi NCT and
4 Union Territories and the bank is listed in BSE, NSE and London Stock Exchange.
Corporate Identification Number u65191mh1949ptc006890
Company Name Ganesh Bank Of Kurundwad Ltd
Year of Foundation 1949
Registrar of Companies RoC-Pune
Registration Number 006890
Line of Business Monetary intermediation of commercial banks, saving banks and discount
houses
Parent Line of Business Other monetary intermediation. [includes monetary intermediation of
commercial banks, discount houses saving banks and other specialised
institutions granting credit for house purchases that also take deposits]
Top Line of Business Monetary Intermediation [This group includes the obtaining of funds in the form
of deposits]
principal business activity Finance
Company Category Company limited by Shares
Company Sub Category Indian Non-Government Company
Class of Company Private
Office Address KURUNDWAD Maharashtra INDIA 416410
State Maharashtra
Authorized capital (in Rs.) 100000000
Paid up capital (in Rs.) 18221000
Date of Incorporation 26/01/1949
Company Status (for eFiling) DORMANT
PRESS RELEASES OF RBI
The Reserve Bank of India has today placed in public domain a draft scheme of amalgamation of the Ganesh Bank of
Kurundwad Limited with the Federal Bank Limited. The Reserve Bank has invited suggestions and comments from members
of public, including the banks' shareholders, depositors and creditors on the draft scheme. The draft scheme has also been
sent to both the banks. Both the banks have been given two weeks' time, upto January 21, 2006, to consider the draft
scheme. The suggestions and comments would be received by both the banks and the Reserve Bank up to Saturday,
January 21, 2006. The Reserve Bank will take a view on the future set up of Ganesh Bank soon thereafter.
It may be recalled that the Ganesh Bank of Kurundwad Ltd. was placed under an order of moratorium on January 7, 2006.
The order is effective upto April 6, 2006 or an earlier date if alternate arrangements are in place. The Reserve Bank was to
decide the future set up of the Ganesh Bank of Kurundwad Ltd. during the period of moratorium. The Ganesh Bank of
Kurundwad was taken under moratorium after being given time to arrange for infusion of capital as also to explore other
options for its future set up. Due to the continued inability of Ganesh Bank to raise the required capital, the Reserve Bank of
India had to exercise the option of compulsory merger available to it under Section 45 of the Banking Regulation Act, 1949.
The Reserve Bank received interest for taking over the Ganesh Bank of Kurundwad Ltd. from the Federal Bank Ltd. The
Federal Bank has, among other things, proposed to pay the depositors fully. The Reserve Bank has examined the proposal
received from the Federal Bank keeping in view its financial parameters, retail network and synergies as well as strategic
advantages. Taking into account the interest of depositors of the Ganesh Bank of Kurundwad Ltd. as well as the bank's
strengths and weaknesses, the Reserve Bank has prepared a draft scheme of amalgamation of the Ganesh Bank of
Kurundwad Ltd. with the Federal Bank Ltd.
Alpana Killawala
Chief General Manager
Press Release: 2005-2006/853
Why merger ?
These two petitions seek to challenge the notification dated 7th January 2006 issued by the Government of India,
Ministry of Finance imposing a moratorium in respect of the 1st Petitioner banking company for a period of 3 months
from the date of order upto and inclusive 6th April 2006. Amongst others, it directs the said bank that it shall not
without the permission in writing of the Reserve Bank of India grant any loan or advances or incur liability. The
exception to this being withdrawal of sums not exceeding Rs.5,000/- by any savings bank or current account holder
with a further relaxation to release an amount not exceeding Rs.10,000/-or the actual balance, whichever is less, in
the event of certain difficulties such as medical treatment, higher education and obligatory expenses like marriage
etc. The petitions seek to challenge the order dated 7th January 2006 issued by the Reserve Bank of India appointing
two directors on the Board of Directors of the said bank. It further seeks to challenge the notification dated 9th
January 2006 proposing a scheme of amalgamation of this bank into the Federal Bank, another private sector
commercial bank, and then finally the order dated 24th January 2006 sanctioning the amalgamation of this bank with
the Federal Bank. The Union of India, the Reserve Bank of India and the Federal Bank are the contesting Respondents
to these petitions.
The case of the Petitioner-bank is that it was carrying on its activities smoothly and that it incurred losses only once
and that was in the financial year 2004-05
 Why merger?
• That the value of the government securities, wherein it had made deposits, went down
• the provisioning norms set up by the RBI were made more stringent by it. It was on this background that
suddenly it was shocked to receive the order of moratorium in the morning of 8th January 2006.
• It led to unnecessary long queue at its branch at Dadar, Mumbai though there was no run on the bank any time
in the past or even on that day as such.
• Thereafter the issuance of the moratorium and the decision of the RBI to take further steps was duly advertised.
The Reserve Bank of India thereafter appointed two directors of its own on the Board of Directors of the
Petitioner-bank on 7th January 2006.
• The RBI then notified the proposed scheme of amalgamating the Petitioner bank with the Federal Bank on 9th
January 2006. The Petitioner bank objected to it by filing its objections on 23rd January 2006, yet a decision was
taken by the RBI and the Central Government on 24th January 2006 sanctioning amalgamation of the Petitioner
Bank with the Federal Bank
 The Ganesh Bank The Federal The Federal
Year of Year Bank Year Bank
Kurundwad Ltd. Ltd. Ltd.

Pre merger Pre merger After merger

2004 230 2004 455 2007 552

2005 230 2005 471 2008 602

2006 229 2006 482 2009 611

NUMBER OF BRANCHES OF THE GANESH BANK OF KURUNDWAD LTD. AND

THE FEDERAL BANK LTD. BEFORE AND AFTER MERGER
 The Ganesh Bank The Federal The Federal
Year of Year Bank Ltd. Year Bank Ltd.
Kurundwad Ltd.

Pre merger Pre merger After merger

2004 3213 2004 6363 2007 6029

2005 3158 2005 6474 2008 6945

2006 3062 2006 6366 2009 7570

NUMBER OF EMPLOYEES
NUMBER OF EMPLOYEES OF THE GANESH BANK OF KURUNDWAD LTD. AND
THE FEDERAL BANK LTD BEFORE AND AFTER MERGER
 Particulars 2001- 2002- 2003- 2004- 2005-06
02 03 04 05
(Rs. In crores)
Ltd.
Financial Performance of The Ganesh Bank of Kurundwad Ltd. before merger with The Federal Bank

Capital and NA
reserves & surplus 9 11 11 11

Deposits 178 188 208 217 NA

Investments 41 49 78 82 NA
Advances 89 98 97 95 NA
Interest income 19 19 18 18 NA
Other income 3 5 4 -1 NA
Interest expended 16 16 16 15 NA
Operating expenses 4 5 5 5 NA
KEY RATIOS PRE-MERGER POST-MERGER
(3years before) (3years after)

Operating Profit Margin 22.04 25.29

Gross Profit Margin 21.47 24.92

Net Profit Margin 33.35 45.03

Return on Net Worth 37.28 21.99

Return on Capital Employed 3.39 2.87

Debt-Equity Ratio 6.41 2.97