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Indusind Bank Clinches Largest MFI Deal, Takes Over Bharat Financial

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: “The biggest gain for us is the rural network. It will also us help reduce cost of funds by 3-4 per cent,” # managing director and chief executive Ramesh Sobti said.

The merger, which will add 6.8 million customers to Indusind Bank’s 10 million now, and which comes amid a slew of similar announcements involving the urban-focused new age private sector lenders such as Kotak Bank and IDFC Bank, will also help reduce cost of lending for micro borrowers as cheaper deposits can be used to fund their credit needs.

Ending months of speculation, Indusind Bank and the second largest microlender Inclusion (BFIL) today announced largest merger in the MFI space in an all-share deal, which will help the private sector lender push its rural network and bring down credit cost for small borrowers.

Earlier this afternoon, the boards of both the lenders separately decided on the merger and approved the share swap ratio wherein BFIL shareholders will get 639 shares of Indusind for every 1,000 shares held.

Sobti elaborated saying that apart from reducing cost of funds, merger will help Indusind not just achieve the priority sector lending sub-targets but also exceed them, making it a player in the PSL certificates market that is fee-accretive.

The merger, which comes amid a surge in agri loan losses by banks, will increase share of micro loans to 7 per cent of the loan book of Indusind bank from 2.8 per cent now, Sobti said, but will dip to 5 per cent over the next three years.

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The deal will have to pass through a slew of regulators such as the Reserve Bank, National Company Law Board Tribunal and fair-play watchdog CCI.

Rao chipped in saying demonetisation led to a Rs. 400-crore loan loss for BFIL, but it has been fully provided.

 

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