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Banking sector may see a flurry of activity in the next few months


Banking sector may see a flurry of activity in the next few months
The Banking sector is already witnessing quite a bit of activity and we may see more of it in the next few months. This month the Reserve Bank of India (RBI) granted banking licences to two new entrants - Infrastructure finance firm, IDFC and the Kolkata based Bandhan.

Several applicants for a banking license have been disappointed. Now, there are reports that L&T Finance which was not awarded a banking license, is looking to buy a stake in Yes Bank. But, it's not going to be easy, as the RBI is likely to scrutinize all such deals very closely.


Romours are also floating around for potential takeover targets, particularly Karnataka Bank. Big banking names have often been linked with a takeover of Karnataka Bank.

Other potential targets could be City Union Bank, Lakshmi Vilas Bank and Dhanlakhsmi Bank.

The reason for the activity in the banking sector is the possibility of the emergence of a stable government at the centre. Banks in India would find this is a an excellent time to consolidate, if the nation sees a stable government for the next 5 years, particularly with an inclination to push growth. By looking at takeovers, mergers, fund raising and stake buys, they could en cash the growth opportunities that would come their way in the next few years.

Existing banks are getting leaner and fitter. PSU banks have started selling bad loans to asset construction companies. SBI has raised $1.2 billion in bond sale overseas and Punjab National Bank has sold its factoring business recently for Rs 108 crores.

Clearly, the focus is also on reducing non performing asset quality as well.

If the country has a stable dispensation at the Centre, we might continue to see a flurry of activity in the banking sector in India.

Read more about: idfc bandhan banking
Story first published: Thursday, April 24, 2014, 9:58 [IST]
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