HDFC Bank, India's third largest bank, is all set to buy Centurion Bank of Punjab in an all-stock deal.

The boards of both the banks will meet on Saturday to finalise the contours of the deal, which will be the biggest banking merger in India.

The banks' top brass have been involved in marathon meetings in the past two days to work out the details of the proposed merger.

The swap ratio will be decided later. Initial calculations suggest that a Centurion shareholder will get one share of HDFC Bank for every 20 shares, according to sources familiar with the development.

However, the exact ratio will be arrived at after a consensus, said an HDFC executive. Post the deal, HDFC Bank will get around 400 branches and thus surpass ICICI Bank in terms of branch presence.

More importantly, the bank's presence in the north and south will receive a boost. Centurion has nearly 170 branches in the north and around 140 branches in the south, whereas HDFC Bank has 250 branches in the north and 150 in southern India.

"We will also acquire a strong small and medium enterprises portfolio from Centurion," the executive added. HDFC Bank has almost 10 million customers compared with Centurion's 2.5 million.

The proposed merger has been spearheaded by Housing and Development Finance Corporation chairman Deepak Parekh, Centurion Bank of Punjab chairman Rana Talwar and Ambit CEO Ashok Wadhwa, said a senior HDFC Bank executive.

The shares of Centurion, which rose sharply yesterday due to the merger buzz, declined today by 1.14 per cent to end at Rs 56.40 on the Bombay Stock Exchange. The HDFC Bank scrip closed lower by 4.40 per cent to Rs 1474.95

Via Business Standard