The Hindu Business Line : Ganesh Bank will help us expand reach: Venugopalan

It's a small bank with 32 branches; with a business of Rs 200 crore of deposits, Rs 100 crore of advances; with NPAs of Rs 8 crore and minus net worth of Rs 3 crore. Federal Bank has been looking for expansion. We are seen as a regional bank because out of 456 branches 330 are in Kerala, and 126 in other States. Our strategy is to expand in other States. Though Ganesh Bank is a small one, it has 32 branches and is also in the agricultural area. Our thrust areas are agriculture and small and medium scale enterpirses (SMEs). Our bank is mainly an SME bank, not a corporate bank. We thought that the cost of acquisition will be hardly anything and this will help us grow in a cluster way. Out of 32 branches of Ganesh Bank, about 10 are in urban areas, 19 are in semi-urban and eight are rural branches. So, we feel it's a good deal for us.

Ganesh Bank has a negative net worth. Banking operations have stopped and it has an NPA of 8.3 per cent. Have you done any sort of collation on how this will impact Federal Bank's financials?

We don't have any due diligence. We only told the bank that we are interested because the moratorium is done. Any bank, which is interested, can express its interest and the RBI will decide on the scheme of amalgamation.

What is your next step, when will you hear from them?

I don't know, may be in about 1-2 days. They may have asked different banks, which I am not aware of.

Have you had any dialogue with RBI? Will it be a merger in which case you will issue stock or merge Ganesh Bank with yourself?

No, in case of a moratorium, if RBI approves our name for amalgamation, we will appoint auditors. Auditors will go into the books and see the net worth of the bank, whether it is correct. In case of an amalgamation, we will have to pay depositors. We find that even if there is a little more NPA than what is stated, it is very negligible as far as our bank is concerned. Rs 3 crore minus net worth with NPA taken into account is Rs 8 crore. The cost of acquisition will be, even in a worst case, only about Rs 10-15 crore. Once Ganesh Bank goes and Federal Bank's brand equity comes, we will be able to do it without any problem.