The Big Four global consultants have received mandates from foreign commercial and investment bankers and private equity funds based in Singapore, Australia, the Middle East and Europe to hold talks with Indian banks.
While private Indian banks are hot on the list of 'wanted', the preference of many private equity funds is for public sector banks like State Bank of India, Corporation Bank and Bank of Baroda, on the back of stock appreciation.
One-branch foreign banks, which shut shop in the recent past, are making inroads back into India. Overseas Chinese Banking Corporation, a Singapore-based bank, which is in the process of winding up its one-branch operations in the country, is among the many on the prowl eyeing Indian banks.
These banks are not looking at enhancing their footprint in India through mergers or acquisitions. Rather they are eyeing India from an investment perspective.
The three surviving Singaporean banks -- Development Bank of Singapore, United Overseas Bank and OCBC -- as well as Australian banks have expressed interest in Indian banks.
Talks are underway with some of the private sector banks for taking sizeable stakes, adequate to allow management control, said senior officials with one of the Big Four.
"Many regional players in Singapore and Australia have expressed interest in China, Indonesia and India," said Ernst & Young Far East Head (group financial services) John Lyngaas. This follows many Singaporean banks finding it difficult to grow their topline in the market place, and hence eyeing offshore for growth opportunities, he added.
"Australian banks have surplus capital and expertise in management," said Lyngaas, adding that the only issue was the distance.
In expectation of India moving towards capital account convertibility, foreign banks not having a presence in the country hope that an equity stake will help control their correspondence banking relationships, said a senior official from a consulting firm.
So what are foreign banks and private equity arms looking for from the Indian banking industry? They are not adverse to buying a problem like NPAs as long as they are confident that the actual figure is as reported, said Lyngaas.
Foreign entities also look at whether there are labour unions, which would restrict their ability to reduce costs; the cultural fit and the quality of information system in terms of service delivery and ability to improve profitability of products, he added. "Consolidation is bound to take place in the Indian banking industry, as there are too many banks today," said Lyngaas.
