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Merger They Wrote
Indian private banks have done well over the past decade, and have allayed fears of foreign banks dominating Indian banking. Kotak calling the shots after the merger of Kotak Mahindra Bank and ING Vysya is an example of this dominance. The major player in Indian banking - public sector banks - have not been doing well, especially those with fewer than 2,000 branches. Privatising these smaller public sector banks may help protect larger PSBs, and Indian banking in general.
A foreign bank subsidiary passed into the hands of an Indian bank in November in the first bank merger in India in several years. ING Vysya Bank merged with Kotak Mahindra Bank (KMB) run by Uday Kotak in an all-stock deal. Dutch giant ING Bank has an equity stake of around 43% in ING Vysya Bank; Kotak has a stake of 40% in KMB. Kotak will call the shots in the merged entity. The merger says something about how the Indian banking market has evolved since banking reforms commenced in 1993-94 and it gives useful pointers to the future.
The deal, in a way, reverses history. ING Bank had stormed into the Indian market by acquiring an Indian private bank, Vysya, in 2002. Now it is itself being acquired by an Indian private bank. Thereby hangs a tale of the changed fortunes for foreign banks in India.
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