LIC could provide funds for Corporation Bank's buyout plan

Life Insurance Corporation (LIC), a strategic investor in Corporation Bank, could provide funds to Corporation Bank to consummate its recently announced acquisition plans.

LIC holds over 26 per cent stake in Corporation Bank.

K Cherian Varghese, chairman & managing director, said: "LIC would be ready to put in money if capital is needed for acquisition purposes."

However, he was quick to add that there is no written assurance from LIC on the same. "It is my inference that LIC would put in extra capital if at all we need it. LIC is a long-term investor and will be ready to put in money since it will be a good investment," Cherian said.

The Mangalore-based bank on Friday got the board's go-ahead to scout for a bank. This is the first instance of a public sector bank getting the board nod for such an acquisition ever since finance minister P Chidambaram flagged off the consolidation issue last month.

On its own, Corporation Bank can easily acquire a bank of its size. "We can easily double our balance sheet and make it Rs 60,000 crore with the current level of capitalisation," he said. Corporation Bank has assets of Rs 30,000 crore and its capital adequacy ratio is 20 per cent "" way above the regulatory minimum of 9 per cent.

Cherian refused to identify his prey and said, "It is better not to have any preconditions although it would be ideal to get a bank which has a complimentary branch network." Emphasising on the critical role played by technology in mergers, he said "We would have to have an interface on the technology front".

Corporation Bank uses an indigenous software for its core banking solution "" Lasersoft from a Chennai-based software company. The same platform is used by Andhra Bank. However, acquisition of Andhra Bank may not really be complementary in terms of geographies since both the banks are strong in the south.

The bank is also planning to carry out some portfolio acquisitions. "We are interested in buying short term assets, corporate loans and also car loans," he said. The bank had earlier bought out some portfolios from ICICI Bank.