04 October 2016 Current Affairs: Kotak Mahindra Bank, the country’s fourth largest private sector lender, has acquired BSS Microfinance in an all-cash deal for Rs 139.2 crore.
The bank said with this, it has entered the microfinance space that has been growing at a rapid pace. This acquisition will allow Kotak to tap the lower end of the customer base and will also help the bank in meeting the priority sector lending (PSL) targets, as BSS’ loans book qualifies for PSL.
At the end of the quarter ended June, BSS had microfinance loans of Rs 483 crore in its books and had a net worth of Rs 73 crore. In FY16, BSS had made net profit of Rs 14 crore. The lender has managed to keep its bad loans in check. As of now, BSS has a presence in Karnataka, Maharashtra and Madhya Pradesh. However, after the acquisition, the bank plans to expand the geographical presence.
Private banks have increasingly started looking at microfinance companies as acquisition targets. Recently, IDFC Bank also bought over South India-based lender Grama Vidiyal Microfinance for an undisclosed amount and made it a subsidiary.
This comes at a time when the microfinance industry is believed to have had grown at 60 per cent last financial year.
Prior to this, in 2014, Kotak Mahindra Bank had acquired Bengalaru-headquartered ING Vysya Bank in an all-stock deal.
Kotak Mahindra and associates are significant shareholders in Business Standard Private Limited.