Pvt equity in banks, FIs dip amid growth | india | Hindustan Times
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Pvt equity in banks, FIs dip amid growth

Private equity (PE) firms and venture capital funds have pumped in $847 million or Rs 3,811 crore into the banks and other financial sector entities this year, a drop of 20% compared to last year even as the contours of the sector are set to change with new banks expected to foray into the market.

india Updated: Sep 02, 2011 23:50 IST
Mahua Venkatesh

Private equity (PE) firms and venture capital funds have pumped in $847 million or Rs 3,811 crore into the banks and other financial sector entities this year, a drop of 20% compared to last year even as the contours of the sector are set to change with new banks expected to foray into the market.

Last year, PE investments into the sector was estimated at $925 million or Rs 4,162 crore . The number of investments has also dropped from 33 to 28, according to Venture Intelligence, a research service focused on private equity and mergers and acquisitions.

However, analysts said that the private equity investments into the banking sector is expected to see a sharp increase in the coming months.

Ratnakar Bank, Dhanaklaxmi Bank and ING Vysya Bank are among those which have raised funds from private equities.

"Old generation private sector banks would need more capital if they have to remain afloat and competitive," an analyst tracking the sector said.

This could mark the first steps of consolidation in the Indian banking sector. The Reserve Bank of India (RBI) is already taking steps to open up the banking sector further. Earlier, it was slated to revisit the regulatory framework in 2009, though it did not happen due to the financial crisis. Old generation private sector banks would be the first to be gobbled up by foreign banks, once the sector is thrown open to foreign banks.

The central bank has started granting licences to foreign entities to set up banks here while a host of new private sector banks is also expected to come up in the next two years, which would change the contours of banking in the country.