Elephant Capital, a private equity firm plans to double its stake in private lender, Ratnakar Bank. The firm has taken this step as a result of Ratnakar's aim to offer minority stakes to many small investors.

"We acquired 2.5% stake in Ratnakar Bank in April and we are in talks to increase it by another 2.5%," said Mohit Burman, MD, Elephant Capital.

The bank is also in talks with HDFC group for picking 5% stake in the bank, said people having knowledge about the issue.

HDFC has however not decided to comment saying that, "As a matter of policy, we don't comment on market speculation."

"Some of these banks are concentrated only in certain areas and naturally they would also want to expand. It would make sense for them to look for either buyers or at least to enter into joint ventures," said a banker familiar to the development. "Investments by PE funds would also have an impact on the valuation of these banks," he added.

Broking entity, Centrum is expected to be holding near 5% stake in Ratnakar Bank and State Bank of Mauritius has around 4.8% stake.