The Reserve Bank of India has asked old private sector banks to scout for long-term partners to help them achieve their banking objectives rather than just look for financial investors. |
This assumes significance since these banks, including Dhanalakshmi Bank, Catholic Syrian Bank, Nainital Bank and Ratnakar Bank, are in the process of raising funds to boost their net worth to Rs 300 crore. |
"Private equity is not the solution as they are just financial investors. Banks should scout for long-term partners that can add value to the bank management and bring financial and managerial stability to them,'' said a senior RBI official. |
"There were 15 banks not having the minimum requirement of a net worth of Rs 300 crore in March 2005. With the amalgamation of seven banks with others, three banks have raised the capital to meet the net worth criteria. Only five banks remain having a net worth of below Rs 300 crore. The matter has been taken up with the remaining individual banks for compliance relating to net worth in a time-bound manner,'' said the Reserve Bank of India in its policy statement. |
Dhanalakshmi Bank has approached the RBI and submitted a plan to boost its net worth, that stood at Rs 134.40 crore in March 31, 2006. "We are planning to raise funds through rights issue. We have informed the RBI. Within a fortnight the bank will decide on the quantum,'' said P S Prasad, chief executive officer and managing director, Dhanalakshmi Bank. |
Kerala-based Catholic Syrian Bank with a net worth of Rs 200 crore has approached the central bank seeking approval to sell 15 per cent stake to AIF Capital Development, a Mauritius-registered private equity firm. The proposal is under RBI scrutiny as the RBI norms stipulate a 10 per cent cap on single-entity holding in private banks. |
"We have urged the RBI to make an exception. Additionally, if this proposal is not cleared, we plan to raise funds through rights issue,'' said the company secretary of Catholic Syrian Bank. |
In the past, the RBI has made exceptions in the case of Yes Bank and Centurion Bank of Punjab. The Netherlands-based Rabobank owns a 19.29 per cent stake in Yes Bank, while BankMuscat owns a 17.76 per cent stake in Centurion. AIF Capital Development has already obtained clearance from the Foreign Investment Promotion Board (FIPB) to pick up 15 per cent stake in Catholic Syrian Bank. |
Ratnakar Bank with a net worth of around Rs 54.19 crore as on March 31, 2006 is also struggling to raise funds. The promoters of Centrum Finance are the single largest shareholder in Ratnakar Bank. The management has received board approval to raise funds through an initial public offering and preferential allotment. Despite this, the bank has not yet raised any funds. The bank's chairman and chief executive officer S G Kutte was not available for comments. |
Meanwhile, the Bank of Baroda board has cleared the deck for the merger of Nainital Bank, a BoB subsidiary, with itself in 2006. This merger is awaiting the necessary approvals. In recent past, capital-starved banks like United Western Bank and Sangli Bank were merged with IDBI Bank and ICICI Bank, respectively. |