The Hindu Business Line : Karur Vysya Bank is not on the block, says Chairman

The private sector Karur Vysya Bank (KVB) is not on the block for sale and the bank will retain its distinct identity, according to Mr P.T. Kuppuswamy, Chairman, KVB.

He said it was not the size but how well a bank adapts to change that was crucial for its growth. Asked at a meeting he had with the journalists of The Hindu group in Coimbatore on Saturday, about the observation of the Finance Minister, Mr P. Chidambaram, on the need for consolidation in the banking sector and asked whether size really mattered, he said: "If asked, we will say it is technology that matters." Even today, many of the new private sector banks did not have many branches but generated large volume of business only by technology. He pointed out that the Finance Minister had only spoken of voluntary merger and there was `no compulsory direction'.

Individual Identity

He pointed out that the Finance Minister's remarks were about the public sector banks and the Minister was making serious attempts in this regard. But as far as KVB was concerned, since it has maintained its identity for the past 90 years and has steadily grown, he said: "We would like to continue to maintain that individual identity as well as growth." He said at present, KVB has 242 branches and it has planned to open 30 more branches during this year.

Answering a question as to whether the bank was trying to shed its image of a largely South India based bank, Mr Kuppuswamy said: "We would like to be a `techie bank' with a pan India coverage," having branches in all important centres in the country. The bank was trying to locate itself in the top 100 centres across India.

When asked whether the small promoter holding in the equity of the bank (the aggregate non-promoter shareholding was close to 96 per cent as at the end of 2005-06) did not make the bank vulnerable to takeover threats — friendly or hostile — the KVB Chairman said the RBI was providing protection to banks from any hostile takeover and this would `continue for another one or two years'. He said the Articles of Association of KVB also prohibited anybody from owning more than five per cent of the shareholding and the bank was also financially very strong. He said the bank would face any corporate raider attracted by the bank's strength.

Ruling out giving any ground to takeover attempts, he said: "We will not yield". He said many of the current KVB individual shareholders were third or fourth generation shareholders and they would not like to part with their shares.

Bonus and Rights

The bank has been amply rewarding the shareholders and even this year, it has announced a 1:1 bonus issue and a reasonably priced rights issue (1:2 rights issue at a premium of Rs 60 per share) and a dividend of 120 per cent. There were very few banks that have given consistently for three years 100 per cent dividend. The bank has come out with three bonus issues within a decade, he added.

Answering a question as to whether the latest announcement on bonus and rights issues would not stretch the equity of KVB a bit too much (KVB's equity is now Rs 17.98 crore and would move up to around Rs 54 crore post bonus and rights issues), Mr Kuppuswamy said: "We are confident of servicing it and we have taken these things into account" (while announcing the decision). As at the end March 2006, the bank's reserves, excluding revaluation reserves, stood at Rs 853.65 crore and the earning per share was Rs 75.28. The KVB share closed at Rs 616.95 (cum bonus) in the NSE on Friday.

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