Shares of small private banks rise on M&A hope post banking bill

Shares in India’s smaller private sector banks gained on hopes the banking amendment bill approved by parliament on Tuesday will spark consolidation in the sector.

[caption id=“attachment_562976” align=“alignleft” width=“380”] Dhanlaxmi Bank gains 3.4 percent, Karnataka Bank gains 4.3 percent while Federal Bank is up 4.4 percent. Reuters[/caption]

The bill lays the groundwork for non-banking financial companies to win banking licences, sparking speculation they could look to purchase smaller lenders to expand their footprint in the sector.

“We think there is a high possibility that many of the new banks could consider acquiring older, smaller banks with large distribution networks such as Karnataka Bank, Federal Bank,” Bank of America Merrill Lynch said in a report.

Dhanlaxmi Bank gained 3.4 percent, Karnataka Bank gained 4.3 percent while Federal Bank was up 4.4 percent.

Reuters