Don't see strategic tie-up with foreign bank: City Union Bk

City Union Bank's MD & CEO N Kamakodi says there is no decision as yet to go in for a strategic tie-up with a foreign bank. The bank is not even considering it as an option, he adds. This comes on the back of the Reserve Bank governor Raghuram Rajan saying there is going to be a bigger opening because they could contemplate new rules for the entry of foreign banks. It may even allow them to take over Indian banks. This in turn has led to some amount of fervour coming into the smaller banking space.

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According to Kamakodi, the taking over or coming in the management will not make much of a difference, but the more important thing is to understand the local market and how to execute things. Though he is quick to add that these foreign banks will be in a position to bring in a lot of capital and technology needed for the future. He says City Union has not been approached by any bank for stake buy or merger. Below is the verbatim transcript of N Kamakodi's interview on CNBC-TV18 Q: Your comments on what the RBI Governor said over the weekend and whether you think this is a feasible option that would culminate soon?
A: If you look at the history of the Indian banking industry per se, the first bank, which is currently the oldest bank existing today is the State Bank of India which had originally opened from the British East India company from Bank of Bengal, Bank of Bombay and Bank of Madras which became Imperial Bank and State Bank of India.
The second set of banks were foreign banks like Standard Chartered Bank. It has been in this country for more than 150 years, BNP Paribas has been in this country for more than 150 years and perhaps in the 19th century a whole lot of banks were operating in this country.
If you look into the bigger ones like Standard Chartered Bank or Citi Bank, they have a strong presence in the metros. But if you look into the overall banking industry, we need a lot of banks now - the options for new licenses are also been discussed and which is expected in the next year. But in recent times, you had cases in old private sector banks like Vysya Bank; where ING picked up stake to become ING Vysya Bank, which was probably the first major in the recent history that a foreign bank took a strategic stake in an Indian bank.
The taking over or coming in to the management alone has not made much of a difference, but the more important thing is understanding the local market and how you execute things. At the same time, they will be in a position to bring lot of capital and technology needed for the future, but you cannot expect a generalized outcome; all strategies will be succeeding or such relationship will be fading and dull.
It will be case to case basis depending upon how good the execution strategy per se is on individual bank case and definitely the banking sector is going to become interesting in the coming days. Q: As you said it could be case by case basis but what about a case like your bank, Karnataka Bank where there is no identifiable promoter, there is zero promoters holding and the stake holding is among various institutions. How do you think a scenario like a foreign entity coming out and buying stake in a bank like yours and stake out?
A: As of now we have not taken such decision or having that as an option per se; we have to see only in the future but as of now we do not have any eye on any strategic tie-up with a foreign bank and right from the beginning we have maintained that we want to maintain our identity and take things forward.
If in case it looks as if those banks which are able to run efficiently, profitably and give the return ratio at par with the best in the industry, we do not see any compelling reason for those banks to take this as a strategic decision but we have to wait and watch. We have not taken such decision or have that as an option as of now.