Asian Development Bank (ADB) may offer a Rs 100 crore line of credit to Centurion Bank in which it holds a 10.22 per cent stake. The multilateral agency has held talks with the bank as well as the Reserve Bank of India (RBI) on the modalities of the funds infusion.
It is now known how this fund infusion will take place. "This is certainly not in the form of equity. Hence, this will not help the bank shore up its capital adequacy ratio to the RBI stipulated 9 per cent. This is a temporary line of credit which will give the bank little time to look for a new suitor," sources said.
Andhra Bank, which has been approached by the RBI to take over Centurion, may not strike the deal, sources added.
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The major foreign stake holders in the bank include Keppel Bank (around 17.5 per cent) through Kephinance Investment (Mauritius) Pte Ltd, Asian Development Bank (10.22 per cent) and the International Finance Corporation (8.36 per cent).
Dev Ahuja, the promoter of the bank, holds around 5 per cent stake. Ahuja had given up his entire rights on another 26.2 per cent stake in the bank held through TCFC Finance Ltd (TFL). TFL has authorised the bank to sell the stake to a strategic investor.
Andhra Bank had earlier appointed Deloitte Haskins and Sells for the valuation of Centurion Bank while the latter had sought the services of Kalyaniwalla and Mistry to take a look at the books of Andhra Bank in the run-up to setting a swap ratio for the merger. Deloitte had also submitted a preliminary report to the bank and the Reserve Bank of India.
According to sources, the ADB line of credit would help the bank get over its immediate problems. The bank, which is set to post net loss for the fiscal 2002, has made an operating profit for the first quarter of 2002-03.
"The liquidity infusion will help the bank to manage the business for the time being. It can also buy time to look for a suitable buyer," sources said.
The bank will announce its results for the previous financial year 2001-02 along with the first quarter results on September 28 along with the details on the line of credit.
Centurion Bank has a deposit base of around Rs 3,500 crore and advances of around Rs 2,000 crore. It has pared its asset base and shifted focus from corporate assets to retail ones.
For the nine months ended December 31, 2001, the bank posted a net loss of Rs 52.18 crore which is likely to increase to around Rs 150 crore for the year ended March 31, 2002. It had made provision of Rs 67.61 crore for the nine months, as against Rs 10.7 crore in the previous year.