DCB Bank Merger

Introduction

At other small lenders like Mumbai-based DCB Bank, growth has remained tepid for almost a year. Its deposit book grew by a meager 7% in financial year 2020, compared with 18% in the previous year.

In contrast, HDFC Bank, and ICICI Bank, India’s largest and second-largest private lenders, witnessed a sharp 8%, and 7.6% increase in deposits in the March quarter. Deposits at India’s fourth-largest private lender, Kotak Mahindra Bank, too, grew nearly 8% in the three months.

Consolidation is gaining momentum in the banking space. After Centurion Bank of Punjab’s voluntary merger with HDFC Bank, another mid-sized Mumbai-based private sector bank, Development Credit Bank (DCB), is looking to merge with a larger bank.

List of top 15 Private Sector Banks in India/ List of Big Private Banks

 

Top DCB sources told that to expand its business in the country, the bank is actively considering merging itself with a large private sector or foreign bank in India before 2009.

The bank has recently reviewed many options, including acquiring a few small banks that would take it into the league of a big bank in the country.

We will open negotiations with other large banks as soon as we find a bank which has a similar business model like ours. Currently, we are reviewing our options. This (a merger) will enhance our profitability, size and the branch network. We believe consolidation is very important for the banking sector to grow, said a source from the bank.

We would like to merge rather than get acquired by a large bank, the source added.

When asked if DCB would look at HDFC Bank for a merger, the source refused to comment.

Interestingly, Nasser Munjee, who is the chairman of DCB, is also on the board of HDFC, which has a 2.32% stake in the bank. The Aga Khan Fund, with 25.10%, is the banks largest stakeholder , while FIIs hold 30.25% stake. Foreign financial conglomerates like Citi (2.06%), Morgan Stanley (3%), Lehman Brothers (3.04%), Merrill Lynch (1.76%) too have stakes in the bank. The Tata group had recently picked up 3.78% of the banks equity.

The bank plans to raise Rs 150-450 crore this year to fund its credit growth and operations.

We will look at raising the required funds after September 2008, through Tier-I or Tier-II bonds. We may look at Tier II capital as there is enough headroom, said an official.

The bank would also enter the mutual fund business soon. The mutual fund industry in India is doing really well. We may look at a suitable partner or go on our own depending on the valuation of the business, the official added.

DCB is focused on both wholesale and retail banking. In the past, DCB saw high NPAs from unsecured assets. But by 2007-08, the bank pruned its gross and net NPAs to 5.5% and 1.6%, respectively.

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