Kotak Mahindra Bank is set to acquire ING Vysya Bank in an all stock amalgamation valued at $2.4bn, resulting in the creation of the fourth largest private sector bank in India.

Under the deal, shareholders of ING Vysya will receive 725 shares of Kotak for every 1,000 shares of ING Vysya.

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Dutch lender ING Groep, which owns 43% of ING Vysya, estimates a net profit of $188m from the deal and will hold 7% in the combined entity becoming the second-largest shareholder in Kotak Mahindra.

Following the approval of the merger, all ING Vysya branches and employees will become Kotak branches and employees, with the combined group comprising over 1,200 branches across the country.

The branches have fewer chances of overlapping as majority of the branches (66%) of ING are located across South India and 68% of Kotak’s branches are located across West and North India.

As part of the deal, Uday Sareen, CEO designate of ING Vysya, will be inducted into the top management of Kotak.

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Uday Kotak, executive vice chairman and managing director of Kotak Mahindra Bank, said, "The opportunities and synergies that this merger will create will place Kotak and its incoming stakeholders from ING Vysya on a new trajectory of excellence and leadership. I firmly believe this merger will pave the way for a bigger and better financial services player with deep Indian roots and global standards of service."

The deal is subject to the approval of both the banks’ shareholders, Reserve Bank of India, the Competition Commission of India and other regulatory approvals.

Meanwhile, shares of the two companies recorded steep gains following the merger buzz, with Kotak soaring 8% and ING rising by as much as 14%.