Midsized private lenders rally up to 17%; South Indian Bank, RBL, Federal, IDFC First lead

Shares of mid-sized private banks rallied sharply on Monday amid growing speculation that they could become acquisition targets for foreign lenders eyeing expansion in India. The surge followed Emirates NBD Bank’s proposal to acquire a majority stake in RBL Bank.

The Nifty Private Bank index rose 1.03% to 28,530.75, led by strong gains in RBL Bank , Federal Bank , IDFC First Bank , and South Indian Bank.

South Indian Bank jumped as much as 16.5% to ₹38.06, emerging as the top gainer among private lenders. RBL Bank rallied 7.5% to ₹321.80, while Federal Bank gained 7.3% to ₹228. IDFC First Bank also advanced 6.5% to ₹76.56. Among others, Bandhan Bank rose 3.8%, and YES Bank added 3%.

Smaller private lenders like Karnataka Bank also witnessed sharp rallies, climbing around 5%, extending recent momentum in the segment.

Among large private banks, Axis Bank and IndusInd Bank climbed around 2% each, while Kotak Mahindra Bank and HDFC Bank saw marginal upticks. In contrast, ICICI Bank slipped over 2% to ₹1,407, capping gains for the broader index.

Meanwhile, the BSE Sensex rose 565.98 points, or 0.67%, to 84,518.17 and the Nifty50 advanced 164.95 points to 25,874.80 level, supported by strong buying in private bank shares.

Analysts said investors are betting on possible consolidation moves in the private banking space, given rising interest from global lenders and strong fundamentals of select mid-tier banks.

The Emirates NBD–RBL Bank transaction marks a landmark moment for India’s banking sector, potentially the largest foreign investment in a private bank to date. RBL Bank, which lacks an identifiable promoter due to its diversified public shareholding, counts Quant Mutual Fund (6.64%), Mahindra & Mahindra (3.47%), LIC (1.27%), Gaja Capital (1.32%), and Zerodha Broking (1.24%) among its major institutional investors.

Following completion of the transaction, the foreign investment in RBL Bank could rise up to 74%, in line with India’s foreign direct investment policy for private sector banks. Until then, the bank plans to temporarily cap total foreign shareholding at 24% to preserve investment headroom.

Upon completion of the preferential issue, RBL Bank will become the largest subsidiary of Emirates NBD, marking one of the largest foreign investments in India’s private banking space and could land it five board positions. The transaction also triggers an open offer to RBL Bank’s public shareholders as per the takeover regulations. The deal is subject to approvals from multiple regulatory authorities, including the RBI and the Cabinet Committee.

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