The Hindu Business Line : HDFC acquires Centurion Bank

The merger comes as no surprise. With further liberalisation, post-2009, on account of WTO regulations, there would be greater accessibility for foreign banks to Indian shores and viceversa.

With competition hotting up, Indian banks will have to gear up to compete with their global counterparts in terms of products, technology and people.

While consolidation via the merger route is one option, scaling up operations through branch expansion is the other, as size becomes all important.

Growth by Indian banks will, therefore, have to be both organic and inorganic.

But in their quest for size and growth, the banks, especially those in the private sector, will need to ensure that the benefits of globalisation percolate to the masses.

Unfortunately, we don't see too many private sector banks willing to lend to the weaker sections. Financial inclusion is the need of the hour to eradicate poverty in India, especially rural India, where bulk of our population resides.

R. Vishvesh, Mumbai

In this era of globalisation, every organisation needs a `scale' in order to operate competitively. Hence, consolidation becomes mandatory among the banks, which will not only help them compete with foreign banks but also help them transfer the benefits to consumers, achieved through reduced cost of operation.

On the flip side, this situation might lead to cartelisation, because of the less number of players in the market. Hence, the Government must ensure that the banks don't collude with each other with a motive to exploit customers.

Tamil Selvam, e-mail

HDFC Bank, by way of merging with The Centurion Bank of Punjab, will become the third largest bank in the country.

This move will also satisfy the expectation of the Finance Minister who feels that the Indian Banks, despite their large size, does not command a leadership position globally. Though the consolidation moves are thwarted by vested interest, it must be overcome.

In case of merger of State Bank of India and its seven associates, the pressure from unions and politicians should be faced with courage and conviction.

R. Swaminathan, e-mail

The swap ratio for Centurion Bank of Punjab & HDFC Bank is quite confusing and might be difficult to justify. While the share price of Centurion Bank is at Rs 51, HDFC Bank is at Rs 1,425. If we were to go by the market price of these shares, the swap ratio will come to 3:1. If the valuations are done by taking the face value into consideration, then the trading of shares can also be done based on their face value, so that it will at least result in more liquidity.

Ramakanth Pai, e-mail

HDFC Bank board approved the share swap ratio of one equity share of HDFC Bank share for 29 equity shares of CBoP. While the CBoP shareholders would definitely benefit from this merger, HDFC Bank shareholders would have to feel satisfied about the long term benefits from the merger move. Moreover, the merger will create a larger entity in terms of technology, products, distribution and manpower. HDFC Bank will also add more branches to its network and expand its business reach.

V. Venkitasubramanian, Kochi

Consolidation in banking sector is inevitable and they will have to gear up to meet the competition from the foreign banks. Though the public sector banks are expected to set a precedent, they obviously suffer form various institutional and political constraints. Even as some of the older private banks carry out their operations successfully, they become merger targets only when their balance sheets get worse. HDFC Bank has planned to merge with Centurion Bank of Punjab (CBoP), in order to augment its deposit and growth prospects. While the non-performing assets of CBoP are higher at 1.13 per cent, it is just 0.4 per cent in HDFC Bank. This will surely have a negative impact on HDFC Bank and its share price has fallen sharply.

T.S. Sundareswaran, New Delhi

The private sector banks have been given licence to make them more competitive and in the last ten years, there has been many mergers/takeovers among them. The new generation private sector banks enjoy many advantages in terms of technology, energetic staff, etc. With the opening up of the financial sector, the need for strong balance sheet and size are gaining prominence. Even our Finance Minister prefers bank mergers. In the case of HDFC Bank-CBoP merger, though there are bound to be some issues, which can be ironed out, I am sure this will set the precedent for many more mergers among Indian banks.

Krithivasan, e-mail

If the HDFC Bank-CBoP merger goes through, it will result in cost reductions, leverage the strength of their manpower and increase the size and reach of their business. Sometimes, it really cannot be understood as why the unions of some public sector banks are opposing when they stand to gain from the move.

A. Jacob Sahayam, Thiruvananthapuram

More Stories on : Private Banks | Mergers & Acquisitions | Sticklish Issues

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Will the Budget package work for poor farmers?

Some long-standing demands addressed

Budget 2008: No big deal for India Inc

Positives on the indirect tax front

Evolving into a CEO

New productivity challenge

HDFC acquires Centurion Bank

Just Do IT

Number Crunch

Welcome relief to individual taxpayers

Proposals that affirm, nullify court decisions

Have values that all can respect