The UK's third biggest bank, Barclays, has confirmed that it is in exclusive talks for $160 billion merger with ABN AMRO, the biggest Dutch bank, that would create the world's largest financial-services acquisition.

ABN Amro has a market capitalisation of $67.18 billion compared to Barclay's $87.41 billion. Barclays is expected to clarify its position later today.

Reports, meanwhile, indicate several other suitors have also approached ABN Amro with offers either to buy the bank in part or in its entirety. They include BNP Paribas, ING and BVA, the reports said.

Barclays and ABN held talks two years ago when they first explored the possibility of a merger.

Barclays, wants access to ABN's foreign businesses, in particular its Asian operations, analysts said. A Barclays-ABN merger would create a bank with 47 million customers and 220,000 staff worldwide. It also may prompt other bids for ABN and Barclays itself.

It was earlier known as a diamond financing bank, but after being in India for 81 years, ABN AMRO has spread its reach far and wide, from commercial, retail, investment banking and even to the asset management business.

ABN AMRO's India operations will be an attractive target for any European bank, be it Barclays, BNP Paribas or Societe Generale, given RBI's tight fisted policy in sanctioning new branches.

ABN's Indian assets are estimated to be over Rs 23,500 crore, which have grown over 52 per cent in 2005, which makes it the fourth largest foreign bank in India. Its buyers, on the other hand, don't even come close: BNP ranks seventh in the pecking order, while Barclays comes at 13 and Societe Generale ranks even lower at 15.

The most lucrative part of the deal for potential buyers will be the addition of Rs 11,863 crore worth of ABN's deposits as the potential buyers currently have barely 3 per cent of ABN's deposit base. Also, ABN has 23 branches in India and since branch licenses are hard to come by, any suitor would want to grab these branches, especially given that India is one of the fastest growing markets for retail banking.

ABN AMRO is weighed down with problems, especially after a hedge fund, namely The Children's Investment Fund (TCI) accused the bank of underperforming. The hedge fund, which owns about one per cent stake in ABN AMRO, has been demanding a break-up of the bank or an outright sale.

TCI also wrote a letter to ABN AMRO's chairman Rijkman Groenink, stating that excluding dividend the bank has given zero returns to its shareholders since he assumed chairmanship in 2000.

The hedge fund also stated that underlying earnings of the bank have been nearly flat for about six years, as the bank rolled out several restructuring initiatives.

Barclays and ABN AMRO were weighing a possible merger two years ago, although it did not materialise. A deal with ABN AMRO will vault Barclays to the number two position in the UK, second only to HSBC.

The deal would also drive Barclays' operations deeper into Brazil, the US and Asia, especially in retail and commercial banking operations.

Also the business which Barclays, BNP Paribas and Societe Generale would like most to get their hands on would be ABN's asset management business, which it launched in India in 2004 and its wealth management business.

All three suitors have already announced big plans for wealth management and private banking in India. In the '90s, ABN also bought out Bank of America's retail operations in India, which has helped it grow its consumer banking business.