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Larsen & Toubro to pick up stake in the City Union Bank

Engineering Corporate Larsen & Toubro will pick up nearly a 10 per cent stake in the City Union Bank for Rs 45 crore at Rs 169 per share.

RBI norms allow a corporate entity to pick up up to 5 per cent stake automatically and up to 10 per cent with the apex bankís permission. However, increasing stake beyond 10 per cent in a bank by a corporate entity is not allowed.

The proposed L&T move will leverage the strength of L&Tís financial services firm L&T Finance and also provide an investment opportunity in the banking sector, which has been doing well. L&T is also expected to get a berth in the bank's board.

The 102-year-old bank, formerly known as Kumbakonam Bank, manages over Rs 3,500 crore in deposits. In FY 2006, CUBís total income stood at Rs 184.14 crore with a net profit of Rs 56.37 crore. The bank slashed its NPA liabilities on net advances down to a mere 1.95% in fiscal 2006 from 3.37% in fiscal 2005. Bank's net worth is close to Rs 320 crore

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