Shetty: More the merrier

Mumbai, Oct. 5: The Industrial Development Bank of India Ltd (IDBI) is hungry for more acquisitions even though it has snapped up ailing United Western Bank (UWB).

“I am in the market,” V.P. Shetty, chairman and managing director, IDBI Ltd, told newspersons even as he elaborated on how the bank would deal with the UWB merger. The government announced the amalgamation of UWB with IDBI with effect from October 3.

“The banking industry is going through a process of consolidation. If anything comes along, we will look into that,” he said. The buzz in banking circles is that IDBI is largely interested in acquiring a South-based bank in order to strengthen its presence.

Although the acquisition of UWB itself will take the total IDBI branch network to 430 from the existing 200, IDBI is not satisfied with these numbers. The bank has laid a target of having a 500 branch network by 2008.

Shetty said that by that year, the total asset portfolio of IDBI would cross Rs 1,10,000 crore. Moreover, the bank was also looking at an international presence. It has made applications to open branches in Singapore, Bahrain and Dubai to begin with.

For the period ended September 30, total deposits in IDBI stood at Rs 31,000 crore and advances were placed at Rs 54,000 crore. The bank witnessed deposit growth that was in line with industry trends, but the increase in advances was way below its peers.

According to the scheme of amalgamation, IDBI will make an upfront payment of Rs 28 per share to UWB shareholders. While this will lead to an outgo of little over Rs 150 crore, Shetty said it would not have any significant impact on its balancesheet.

He, however, conceded that capital adequacy ratio (CAR), which now stands at over 14 per cent, may dip marginally. One of the options that the bank has is to take this amount from its reserves, which could impact the CAR.

Though UWB had gross non performing assets (NPAs) of less than Rs 500 crore, the IDBI chairman did not foresee any problems on this front. He felt that the bank would look at various options that include one-time settlement or selling them to asset reconstruction companies for these NPAs.