Mumbai, June 7: Call it the effect of competition from large-sized banks or pressures in the traditional business of lending, commercial banks based in the south have begun looking northwards for growth and consolidation as a pan-India presence becomes essential.
Vijaya Bank, the Bangalore-based nationalised bank, recently created quite a stir when it announced it might take over a bank from the north.
Merchant bankers are not surprised by the development and feel that this trend could gather pace in future as these banks find their turf coming under intense pressure from large-sized tech-savvy banks and changes in their traditional business of lending.
“These banks will have to look at consolidation or an increased visibility in the country if they have to survive. Some of them have a shareholder base that is widely-distributed and their promoters cannot afford to be complacent any more,” a senior merchant banking official said.
He added that as against a situation where such banks were comfortable with their niche clientele, the changing dynamics of the banking game are now forcing them to take a second look at their regional character.
Vijaya Bank, which has a strong portfolio of agricultural advances, has announced that an acquisition in the north would enable it to grab a significant chunk of advances to the farm sector.
Reports suggested that Bank of Punjab, Punjab & Sind Bank, and Bank of Rajasthan were likely candidates being eyed by Vijaya Bank.
Karur Vysya Bank (KVB) is another bank which begun with a regional flavour and is now looking at the northern region as part of its plan to be visible nationally. The private sector bank is contemplating setting up more branches and the idea is to increase the coverage to a total of 50 branches in three years from the existing 20.
Speaking to The Telegraph, P. T. Kuppuswamy, chairman, KVB, said, “Many of our new business clientele have relationships in the north. Therefore, an all-India presence helps us to serve them better.”
KVB, which was set up in 1916, began by providing financial assistance to traders and small agriculturists in and around Karur, a textile town in Tamil Nadu. Since then, the bank has consistently expanded its presence in Tamil Nadu and neighbouring states like Kerala.