United Bank of India's low net worth led to a poor swap ratio for its merger with Punjab National Bank as compared to the Oriental Bank of Commerce, an industry official said on Monday.
PNB, in a regulatory filing, had announced the share exchange ratio in accordance with the scheme of amalgamation, as it is set to merge OBC and UBI into itself with effect from April 1. According to the swap ratio, 1,150 equity shares of PNB are to be exchanged for every 1,000 equity shares of OBC, while 121 equity shares of PNB are to be swapped for every 1,000 equity shares of UBI.
PNB will be the anchor bank post the merger. The merged entity will be the second-largest public sector undertaking bank in India and March 25 has been fixed as the record date for the share allotment. The official told PTI that UBI had been running into losses for some time, except for the last four quarters.
"However, OBC got capital infusion from the government which UBI did not. This capital infusion helped OBC to provide for the losses which resulted in a higher net worth unlike UBI," he said. "UBI shareholders will have to keep their holding for at least two years, after which they can make some money," he added.
The official said that post the amalgamation, the entity will be named Punjab National Bank and have a new non- executive chairman, which will be appointed by the government. The Union Cabinet had approved the merger on March 4.
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