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| IDBI Bank identifies merger candidate |
| BS Reporter / Mumbai Nov 26, 2009, 00:50 IST |
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IDBI Bank Chairman and Managing Director Yogesh Agarwal on Wednesday said the bank had identified a potential merger target even as it had abandoned the plan to sell its home finance arm.
The bank is the latest to join the consolidation bandwagon with Canara Bank saying that it would look to strengthen its presence in Maharashtra, Gujarat and Haryana. Others such as Union Bank of India have also stated their intent to gain in size by acquiring another bank.
IDBI Bank was formed after the conversion of the erstwhile finance institution — Industrial Development Bank of India. Subsequently, it merged IDBI Bank, promoted by it, and acquired United Western Bank.
 The bank, though smaller than many of its public sector peers, is in a unique position as the government had told Parliament while repealing the law governing the erstwhile financial institution that the new entity would not be merged with another bank.
Agarwal’s statement comes a week after the government called select bank chiefs to discuss consolidation. The IDBI Bank chief was, however, not invited.
He said the bank might consider a follow-on public offer to infuse capital for growth this financial year. “We don’t need capital infusion for mergers, we need it for business growth and may consider a follow-on issue this financial year if the government approval comes through.”
On the bank’s proposal to sell its home finance arm — IDBI Home Finance, Agarwal said the plan had been scrapped as of now. The bank had invited bids to sell the subsidiary about a year ago. But with bids falling short of the internal valuation, the finance ministry forced the bank to first defer a decision and then asked it to explore other options. “IDBI Home Finance will continue to be a 100 per cent subsidiary,” he said on the sidelines of a conference here.
Agarwal said he did not expect any reduction in interest rates on home or auto loans. Instead, he said expected the rates to move up “anytime now”.
“I had said earlier that interest rates will rise after Diwali, but due to slow credit off-take, interest rate hikes did not happen,” he said.
At present, the bank offers floating rate home loans in the 8.75-9.25 per cent band.
Agarwal also reiterated the bank would meet its credit growth target, though overall bank credit growth had dropped to a 12-year low of 9.8 per cent. In its second quarter review of the monetary policy, RBI had lowered the credit growth projection for the current financial year from 20 per cent to 18 per cent.
IDBI Bank shares fell 0.59 per cent to close at Rs 125.35 on the Bombay Stock Exchange, while the Sensex rose 0.4 per cent.
Also read:
Oct 22: Govt asks IDBI to review mortgage arm sale decision
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