RHB and OSK Holdings said on Thursday they had sought the central bank's approval to start talks to merge RHB's banking business with that of OSK Investment Bank.

OSK Investment Bank could fetch 1.72 billion Malaysian ringgit to 1.99 billion Malaysian ringgit, based on its estimated book value of about 906.4 million ringgit at end-2010, the paper said.

RHB Capital was not immediately available for comment

The proposed merger comes as Malaysian authorities are encouraging lenders to consolidate to create larger banks that can acquire more regional market share.