IFC in talks with Fed Bank for buying 10% stake

Looks to invest in small-sized and mid-sized private sector banks.

International Finance Corporation (IFC), the private sector arm of the World Bank, is in talks with Kerala-based Federal Bank for acquiring a 10 per cent stake.

IFC is also in talks with the country's largest private sector bank, ICICI Bank, for buying its 20.76 per cent stake in Federal Bank. ICICI Bank is the largest shareholder in Federal Bank.

Iyad Malas, director-south Asia, IFC, said, "We are looking for long-term investment in the Indian private sector banks. Federal Bank, after having called off its decision to takeover Lord Krishna Bank, is currently examining this option."

About the size of investment, Malas said that IFC is interested in investing in small-sized and mid-sized private sector banks and the investments would range from $5 million to $30 million.

As per the Reserve Bank of India (RBI) guidelines, no single entity can buy more than 10 per cent stake in a private sector bank. The rule applies to IFC as well.

IFC is keen on investing in private sector banks to enable them to make up for additional capital requirements to meet the capital adequacy norms stipulated under the Basel II norms.

In 2004, IFC had invested $422 million in Indian operations. It expects to invest $400-450 million in Indian private sector ventures this year.

In fact, Malas added that if the Indian government lifts restrictions on the infrastructure sector, IFC would even invest upto $400 million in this sector alone.

IFC is currently in talks with small-sized private sector banks for acquiring equity stakes. IFC already has a 5 per cent stake in ING Vysya Bank and Centurion Bank. It also has a stake in SBI Capital Markets.