KOCHI: With consolidation being the buzzword in banking circles these days, two of the country’ oldest banks – Catholic Syrian Bank and Dhanlaxmi Bank – which have also been takeover targets for long, are back in focus. According to experts, either a merger or an acquisition of these banks will happen soon.
“India is marching towards the idea of fully digital banking. Under the scenario, consolidation of small banks will be the new normal. Now banks are investing more on technology which smaller banks could not do. Hence, it is irreversible that consolidation of small banks would happen,” said V K Vijayakumar, investment strategist at Geojit Financial Services.
For one, the financial health of Dhanlaxmi Bank and CSB is at alarming levels. The gross non-performing assets of Dhanlaxmi Bank rose to Rs 504 crore as of December-end 2016 from Rs 481 crore in the preceding quarter. The gross NPA of CSB is Rs 463 crore and net NPA at Rs 331 crore for the first six months of 2016-17 (the last reported figures).
“Merger or acquisition of small banks with lesser financial health will happen in the future. In the past also, it had happened in Kerala. Many small banks have merged with larger banks. But this will not happen as swift as it is expected. The major reason is low capital with banks. In the Budget, only Rs 10,000 crore was provided for capitalising banks, which is too low,” said Abraham Tharian, former executive director, South Indian Bank.
“At present, we do not think about any consolidation as we have got a good partner in Fairfax Financial Holdings. The Rs 1,000-crore investment will be enough for the bank to sustain. Also, the Fairfax investment comes with a lock-in period of five years. At present, an independent agency is doing the valuation of CSB. We expect that it will be completed by April-end. The deal with Fairfax Financial is likely to be completed by mid-June,” T S Anantharaman, chairman, Catholic Syrian Bank, told Express.
An email sent to Dhanlaxmi Bank for a response did not elicit any response.
Dhanlaxmi Bank was incorporated in 1927 and employs 2,500 people. CSB, started in 1920, will complete 100 years by 2020. It has 3,000 employees.