Mumbai: Bank of Baroda, India’s third-largest state-run lender, is seeking to sell unit Nainital Bank as it sheds non-core assets to bolster its balance sheet, people familiar with the matter said.

A decision on the size of the stake to be sold will depend on approvals from the Reserve Bank of India (RBI), the people said, asking not to be named as the information is not public.

Bank of Baroda holds 98.6% stake in the 96-year-old Nainital Bank, which had assets of about Rs7,700 crore ($1.2 billion) as of March end, information available on the lender’s website shows.

Deliberations regarding the sale are at an early stage and private equity firms have expressed initial interest, the people said. There’s no guarantee the talks will lead to a sale, they said.

Nainital Bank Ltd has about 135 branches spread across five states in the country, according to its website. The bank reported a net income of Rs48.4 crore in the year ended 31 March, little changed from the previous year, and its bad-loan ratio stood at 5% of the total. That compares with a soured-debt level of 9.6% for the country’s banking system, data compiled by the RBI show.

Bank of Baroda doesn’t comment on market speculation, a spokesman for the lender said by email.

A sale would help Bank of Baroda, helmed by CEO P.S. Jayakumar, buttress its capital buffer and clean its balance sheet of soured debt. The Mumbai-based lender had a capital adequacy ratio of 11.6% as of 30 September, exchange filing shows. Bloomberg

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