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Kerala banks face takeover threat

By Our Staff Correspondent

THRISSUR NOV. 17. Conflicting views are being expressed on the possibility of the takeover of the five Kerala-based private sector banks by industrial groups and individuals outside the State and the country. The five private sector banks in Kerala are: Federal Bank, Aluva, South Indian Bank (SIB), Thrissur, the Catholic Syrian Bank (CSB), Thrissur, The Dhanalakshmi Bank (DLB), Thrissur, and The Lord Krishna Bank (LKB), Kochi. The sixth private sector bank in the State, the Nedungadi Bank, has already been merged with Punjab National Bank (PNB) while the controls of three other banks, the DLB, LKB and CSB, have already been wrested by the business groups outside the State. The latest fears about such a `takeover possibilities' have been triggered by the reported move of ICICI Bank to sell its holding in Federal Bank and SIB. ICICI Bank is the single largest shareholder of both these banks with 20 per cent holding in Federal Bank and 11.38 per cent in SIB. The reports of the `takeover fears' have already invited strong reactions from the ruling and opposition combine as well as several trade unions in the banking sector. Their fear is that the takeover will adversely affect the lending operations in the State, which is already facing the problem of low C-D ratio of less than 50 per cent. The oft-repeated complaint has been that while the large number of non-resident Keralites (NoRKs) deposit huge amounts from their earnings in banks in the State, the banks are not making efforts to make adequate lending in the State, an argument vehemently being denied by the banks saying that it was the lack of projects that was slowing down the lending operations. According to the critics of the `takeover threats' the scattered nature of shareholding of the private sector banks in Kerala make them vulnerable to takeovers by big groups outside. "The Managing Director of ICICI Bank, K. V. Kamath, had come personally to Aluva a couple of days back to assure us that they will remain invested in Federal Bank," the Chairman of Federal Bank, K. P. Padmakumar, told The Hindu here.

Recalling that ICICI Bank holds only 11.38 per cent in SIB, the bank Chairman, A. Sethumadhavan, said, "This is not a significant holding to alter the nature of ownership of the bank. But ICICI Bank has made it clear that they have no plans to divest their shares in SIB".The CSB has also been facing takeover threat for the last several years by the Thailand-based Chawla group. Even though the transfer of shares of the bank to the Chawla group is still in the limbo the group wields a substantial say in its board. When contacted the CSB Chairman, N. R. Achan, dispelled fears that the bank was likely to shift its operations away from Thrissur when the takeover was formalised `because our infrastructure in Thrissur is absolutely fine'.

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