Canara Bank may look at the possibility of taking over smaller lenders Vijaya Bank and Dena Bank, even as the government has been positive about bigger banks resulting after the next wave of consolidation.
"Discussions are on between the banks. There is a possibility that first Vijaya and Dena merge, before being taken over by Canara Bank," a senior government official told financial daily Economic Times.
The Bengaluru-headquartered lender is the fourth biggest bank by way of market capitalisation behind State Bank of India, Bank of Baroda and Punjab National Bank. The government is likely to push the proposal forward only after the monsoon session of Parliament is over in August, the Economic Times said.
The government of India's stake in Canara Bank was 66.3 per cent at the end of March. Life Insurance Corporation, also owned by the central government, held 13.62 per cent.
The board of directors of the bank had on June 15 okayed the raising of debt capital through additional Tier I bonds of up to Rs 1,800 crore and Tier II bonds up to Rs 1,000 crore.
The bank's capital adequacy ratio improved to 12.86 percent at the end of March, from 11.08 percent a year before.
For 2016-17, the bank posted a profit of Rs 1,122 crore, against a loss of Rs 2,813 crore in fiscal 2016.
Economic Times said that apart from Canara Bank, banks like Indian Bank, Indian Overseas Bank and Syndicate Bank will be looking for consolidation among themselves. Most banks have been asked to consolidate to become bigger lenders.
Dena Bank is among the five public sector bank that the RBI has restricted sanction of fresh loans and dividend distribution. The other four are IDBI, Bank of Maharashtra, Central Bank of India and Uco Bank.
Dena Bank posted losses of Rs 575.26 crore for the March quarter while Vijaya Bank reported a profit of Rs 204 crore for the same period. Canara Bank is among the top five banks in the country with a network of around 7,000 branches.
