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HDFC Bank eyes control of IDBI Bank

New Delhi, Nov. 8: Industrial Development Bank of India (IDBI), on the lookout for buyers for its Rs 6,795-crore banking subsidiary, may have finally found an answer in HDFC Bank. IDBI has in the past been in talks with JP Morgan and Sidbi to offload its stake.

Top officials of HDFC Bank— which has grown at a blistering pace in the past few years overtaking its 25-year old parent Housing Development Finance Corporation in terms of assets—told The Telegraph that it was keen on acquiring a controlling stake in IDBI Bank.

“We are interested in IDBI Bank and are open to the idea of picking up a stake if we get value for money.” The official explained that by “value for money,” the bank meant the “price should be right”.

The Reserve Bank of India had earlier instructed IDBI—which holds 57 per cent in IDBI Bank—to lower its stake to around 49 per cent. Sources say the financial institution has informally decided to offload 8 per cent stake in favour of the Small Industries Development Bank of India (another co-promoter of IDBI Bank with a 14 per cent stake).

Once this sale is complete, IDBI wants to sell off the remaining 49 per cent or a major chunk of it to an Indian bank after it has acquired a banking licence. It is this controlling chunk which HDFC Bank is now eyeing.

IDBI itself is no longer interested in a reverse merger with its banking arm as the current deposit base of IDBI Bank (Rs 16,000 crore) will not boost the parent’s scheme of things in the retail-banking business as it already has an asset base of Rs 65,000 crore.

IDBI Bank has a low-cost deposit base of Rs 16,000 crore, 247 ATMs and 60 branches (spread across 63 cities) with over 60 per cent of its network located in Tier-II cities.

This could well dove-tail with HDFC Bank, which has a total deposit base of Rs 19,606 crore and is spread across 110 cities with more than 200 branches and a network of 640 ATMs, with plans to spread to another 10 cities as well as increase its concentration of ATMs.

HDFC Bank also said it would concentrate on its credit card business along with relationship price banking from where it expects to garner maximum profits.

When queried if this pace of growth sets the motion for a reverse merger between HDFC Bank and the parent, bank chief Aditya Puri said, “The chances of a reverse merger are very slim as the rate of growth won’t be substantial. Also, we will have to give up the tax rebates and hike our SLR and CRR.”

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