Bank of Baroda seeks to sell unit Nainital Bank to bolster capital

Bank of Baroda (BoB), India's third-largest state-run lender, is seeking to sell unit Nainital Bank as it sheds non-core assets to bolster its balance sheet, people familiar with the matter said.

A decision on the size of the stake to be sold will depend on approvals from the Reserve Bank of India (RBI), the people said, asking not to be named as the information is not public. BoB holds 98.6 per cent stake in the 96-year-old Nainital Bank, which had assets of about Rs 77 billion ($1.2 billion) as of March end, information available on the lender's website shows.

Deliberations regarding the sale are at an early stage and private equity firms have expressed initial interest, the people said. There’s no guarantee the talks will lead to a sale, they said.

Nainital Bank has about 135 branches spread across five states in the country, according to its website. The bank reported a net income of Rs 484 million in the year ended March 31, little changed from the previous year, and its bad-loan ratio stood at 5 per cent of the total. That compares with a soured-debt level of 9.6 per cent for the country's banking system, data compiled by the RBI show.

BoB doesn't comment on market speculation, a spokesman for the lender said by e-mail.

A sale would help Bank of Baroda, helmed by CEO P S Jayakumar, buttress its capital buffer and clean its balance sheet of soured debt. The Mumbai-based lender had a capital adequacy ratio of 11.6 per cent as of September 30, exchange filing shows.