Corp Bank board gives nod for acquisitions

The board of directors of Corporation Bank today authorised its management to scout for banks for acquisition. This is the first instance of a public sector bank board giving the go-ahead to play in the consolidation game since finance minister P Chidambaram flagged off the issue at the Indian Banks' Association's annual general meeting (AGM) last month.

Immediately after the board meeting in Mumbai, K Cherian Varghese, chairman & managing director of Corporation Bank, said: "Our first priority is to protect our identity. We have a very good brand name and we want to leverage that."

He was quick to add: "We do not have any banks in mind at the moment. However, we will start studying various public sector banks now. We have been authorised to do so by the board. Ideally, we would like to acquire a bank that has a strong geographical presence in an area where we do not have presence." The Mangalore-based Corporation Bank is highly capitalised with its capital adequacy ratio at over 20 per cent.

Varghese now joined the long list of bank CEOs who have expressed intention to take over another bank. Oriental Bank of Commerce (OBC), which has got the beleaguered Global Trust Bank merged with itself, is now looking at another bank in Kerala to take over.

Chairman of Punjab National Bank and Indian Bank have also announced their plans to acquire banks. Bank of Baroda chairman PS Shenoy wants to acquire a bank either in the north, south or east since it has a strong presence in western India.

Vijaya Bank has also announced its intention to acquire a bank in the north. M S Kapur, chairman & managing director, Vijaya Bank, has gone to the extent of saying that he does not mind doing an OBC act (read: he would not mind acquiring an ailing bank). Bank of India and Union Bank are also reportedly talking "marriage".

The Indian Banks' Association has formed a committee to come out with a report on how to facilitate mergers and acquisitions in the banking sector. One of the ideas being mooted is the corporatisation of banks to ensure favourable tax treatment following a merger.