Corporation Bank, Andhra Bank and Dena Bank, are the hot favourites takeover targets among the large PSU banks which met the Finance Ministry officials on Wednesday.
Chiefs of Punjab National Bank, Canara Bank, Union Bank of India, Bank of India and Bank of Baroda met Finance Ministry official to discuss the pros and cons of consolidation among banks in India.
Sources from banking industry, on condition of anonymity, said Union Bank, Bank of Baroda and Punjab National Bank were keen on acquiring Corporation Bank while Canara Bank and Punjab National had shown interest in Dena Bank.
Bank of India had expressed interest in Oriental Bank of Commerce. Union Bank and PNB had also shown interest in Andhra Bank.
Bankers point out that the discussions on are in preliminary stage and it may take very long for it to materialise. Sources said that the Finance Ministry officials are likely to meet CEOs of small to medium size PSU banks to read their mind on consolidation.
CEOs of small-to-medium-size banks are most likely to oppose any move of being acquired by large bank on the grounds that loyal customers will desert them and that the banks are performing better on stand alone basis.
Interestingly, none of the large banks were keen on acquiring any bank located in eastern belt namely UCO Bank, Allahabad Bank or United Bank of India on fears that there could be resistance from the political front and other labour issue.
In fact one of the suggestion that came forth during the discussion was to merge all the three Kolkata based banks into one. None of the large banks showed interest in Bank of Maharashtra, Central Bank of India, Punjab & Sind Bank. Sources said that the resistance was largely due to union problems faced by these banks.
Government has been talking of consolidation among Indian banks for over five to six years. However, sources said that this time large banks were eyeing smaller banks which gave them better geographical reach and had relatively clean balance sheets. This was not the case in the previous round of discussion.
For instances, on Wednesday, PNB made a pitch for banks located in the west namely Gujarat and Maharashtra, Union Bank of India and Bank of Baroda showed interest in southern belt, Bank of India was keen on increasing its presence in the north belt while Canara Bank also showed interest in increasing its presence in western India.
In the past, chiefs of Bank of India and Union Bank of India were keen on merger which would make them a strong bank in the western belt since both banks have huge presence in Gujarat and Maharashtra. But the talks failed to materialise due to strong resistance from the Left front.
During the meeting with Finance Ministry on Wednesday, banks urged them to frame rules for M&A. Every bank would like to acquire another bank irrespective of its size. Nobody wants to be acquired. But if there is a set rule on which banks are eligible to acquire and what would be to the terms, it would enable banks to work on consolidation, suggested one of the bank chief in the meeting.
Government has received $2 billion from World Bank which is aimed at providing financial support to PSU banks to help them meet the capital requirement. Many banks have indicated to the Finance Ministry of the capital requirement over the next three years to maintain growth.
Bankers say that before allocating the capital to banks, government is making a bid for consolidation.