The Hindu Business Line : South Indian Bank looking at small North-based banks

"MERGERS and acquisitions are the way forward for small but dynamic banks looking for rapid growth," according to Dr V.A. Joseph, who is slated to take over as Chairman of South Indian Bank on Monday.

With the RBI stipulation that private banks should have a net worth of Rs 300 crore, several smaller banks might find the going tough in future, he said. For the moment, the net worth of South Indian Bank is Rs 450 crore, which it plans to increase to Rs 1,000 crore by 2008.

There are several priorities before the bank as far as mergers and acquisitions are concerned. It should be a small bank with optimally positioned workforce, synergy of business operations, compatible technology base and preferably North-based - having more branches in north India. There are already a few such banks in north India, which are worthwhile looking at, Mr Joseph said.

The bank planned to continue its focus on retail credit. The advantage of retail loans for smaller banks stems from the fact that the bank and its staff know all its customers personally and the chances of default are minimal. Also, the returns on retail credit are much higher now than from big-ticket corporate lending.

Though size may not matter much at the moment, in the long run it definitely will. And organic growth by itself may not provide the right impetus for growth, Mr Joseph said.

Micro credit is going to be another focus area for the bank. The bank is not only extending micro credit finance to NGOs, but has also begun to adopt villages and meet the entire micro credit requirements of the concerned villages. The bank has already adopted the Chellanam village in Kochi and another village in Kozhikode under the scheme.

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