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Construction : Deals | August 2013 | Source : Construction Update

Canara Bank likely to buy loan books of some NBFCs

India's fifth largest State-owned lender Canara Bank is looking to buy retail loan portfolios of various non-banking financial companies' (NBFCs) including Warburg Pincus-backed Capital First, Bajaj Finserv and Indiabulls Finance.

Canara Bank is is looking to buy another tranche of Rs 500 crore from Capital First, Bajaj Finserv and Indiabulls Finance after it bought a tranche of same size earlier from Capital First. Other public sector banks are also in talks to strike similar deals.

Buying of these loan books of NBFCs would allow banks to increase their customers as well get high quality customers as NBFCs have stringent norms for lending.

The banks would get low-cost deposit at the rate of 3.5 per cent and can deploy it at an average rate of 10.5 per cent with the borrowers of NBFCs. NBFCs lend to their customers at a rate of 13 per cent which is higher than PSU’s rate. On the other hand NBFC’s would get the money to look for more opportunities.

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