MUMBAI: Ending months of speculation, Bharat Financial Inclusion (formerly SKS Microfinance Ltd) on Monday said it entered into exclusive merger talks with IndusInd Bank Ltd.
If the deal comes through, it will be a third for IndusInd Bank, after taking over Deutsche Bank’s credit card portfolio in 2011 and RBS’ diamond financing book in 2015.
The merger with Bharat Financial is expected to help IndusInd ramp up its micro finance book, which currently accounts for about 8 per cent of its total loan book.
“The company has entered into an exclusivity agreement with IndusInd Bank for agreeing to have an exclusive discussion with IndusInd Bank about the proposed potential strategic combination by way of amalgamation through a scheme of arrangement, or any other suitable structure,” Bharat Financial Inclusion said in a filing with the bourses.
“The exclusivity agreement provides for a mutually agreed exclusivity period for due diligence and discussions to evaluate a potential strategic combination between the company and BFIL,” said IndusInd Bank.
The announcement comes at a time when banks like IDFC Bank, Kotak and RBL have either acquired or picked up minority stakes in MFIs. BFIL already has a business correspondent relationship with IndusInd in Karnataka and the proposed merger will allow the latter to tap the rural market for deposits besides expanding its customer base.
BFIL has 1,408 branches, employs over 15,000, serves 6.8 million customers and has a loan book upwards Rs 10,000 crore. But disbursements and collections took a hit following demonetisation.