The merger of 94-year-old private sector Lakshmi Vilas Bank with DBS Bank India has put the Singapore headquartered foreign bank a few notches up in terms of balance sheet size in India.
The merged balance sheet size or total assets at Rs 86,532 crore has put the bank in the league of Bank of America, JP Morgan and, RBL Bank.
The DBS Bank balance sheet size was Rs 62,864 crore as of March 31, 2020. The latest September quarter has disclosed Lakshmi Vilas balance sheet size at Rs 23,668 crore. DBS Bank must have grown its balance sheet in the first half of the current year but those numbers are not in the public domain.
The merger between the two banks is effective from November 27, 2020. The RBI had initiated the merger after the deteriorating financial health of the old private sector bank.
The finance minister Nirmala Sitharaman has recently said that the "merger sends the right message that Indian banking sector is being opened up". In the past, foreign banks were never considered for buying out any Indian bank.
DBS Bank made the cut for two reasons. First, it has the ambition to expand in India. This was quite evident when the bank was the first among the large foreign banks present in India that had opted for the wholly-owned subsidiary model. Currently, the foreign banks are operating in India as a branch of the patent. The locally incorporated subsidiary model offers the freedom to expand in India in terms of branches. It is almost like a par treatment when it comes to even mergers and acquisitions.
The merger of Lakshmi Vilas Bank shows that the bank has grabbed yet another opportunity to expand its franchise in India.
Clearly, the bank's assets would grow at a faster pace in the coming years with 600-plus branches.
Currently, the foreign bank provides an entire range of banking services from large, medium, and small enterprises to small individual consumers. Four years ago, the bank launched India's mobile-only bank - Digibank, which has over 2.6 million customers. In digital banking with a presence in semi-urban centres of India, the bank will have a good opportunity to expand its business and balance sheet.
The bank has already received a capital infusion of Rs 2,500 crore from patent to support the India franchise post the acquisition. The integration work has already started which involves IT systems, people, branches, etc.
The top four foreign banks with Rs 1.85 lakh crore to Rs 2.20 lakh crore balance sheet size in India are Citibank, HSBC, Stan Chart, and Deutsche Bank.