Reportedly, with 641 branches, Federal Bank has a total business of around $590bn and deposits of $334bn in South India. IDBI Bank zeroed in on the Federal Bank after assessing its financial strength and possibilities of integration in terms of work culture.
The deal, if materialises, is expected to enable IDBI to strengthen its position among public sector banks by increasing branch network and human resources besides bolstering its deposit-base.
However, IDBI Bank, which was earlier a financial instition, will have to take government aid for equity capital unless the deal is an all-cash transaction. The government owns above 52% in it.
An official at IDBI Bank said: “The government will have to infuse money without which it will be difficult for the bank to go ahead with such a proposal under normal circumstances as the value of this buy will be huge.”
Yogesh Agarwal, chairman and MD of IDBI Bank, said: “It is a private sector bank. Talks are on. Due diligence has been done. I cannot commit on the time-frame.”
