The Hindu Business Line : Awaiting administrative guidelines from Govt

Mr. Romesh Sobti, Executive Vice-President & Country Representative of ABN Amro (left), and Mr Sandeep Bakshi, Managing Director and CEO, ICICI Lombard, at a press conference in Chennai on Wednesday. - - Shaju John

Chennai , Feb. 25

THE Dutch multinational bank ABN Amro is still awaiting "administrative guidelines" from Indian authorities to decide whether or not to convert the Indian operations into a subsidiary incorporated in India.

The Government had allowed foreign banks to set up subsidiaries in India, after an announcement to that effect was made in the Finance Minister's budget speech on February 28, 2002.

ABN Amro is one of the banks that are keen to incorporate in India.

But the bank's Executive Vice-President, Mr Romesh Sobti, said on Wednesday the complete administrative guidelines were yet to come.

"Basically it is the conditions attached such as what will be the guidelines for priority sector lendings and rural branches," Mr Sobti told Business Line.

Apart from this, there is the issue of whether the foreign owner will be allowed voting rights of more than 10 per cent.

Incorporating in India would make it easier for getting branch licences, but would subject the bank to local regulatory requirements, such as capital adequacy and priority sector lending.

Mr Sobti said while ABN Amro was keen on converting itself into a subsidiary incorporated in India, the bank would have to see how the guidelines evolve.

Incidentally, no foreign bank has so far taken the option of incorporating in India.

Recently, Mr Christopher Low, CEO, India Region, Standard Chartered Bank, also told Business Line the bank was not in favour of incorporating in India. Incidentally, StanChart recently converted its Hong Kong operations into a subsidiary incorporated there.

Mr Sobti was here in connection with the launch of ABN Amro's home loan product.

The bank offers home loans at 6 per cent in the first year, 6.5 per cent in the second and a floating rate from the third, regardless of the loan period or the amount. Also thrown in is a free insurance cover, offered in collaboration with ICICI Lombard.

Answering a question, Mr Sobti said the bank was not keen on buying home loan portfolios from other banks or finance companies.

This contrasts with what he had said in November 2001, that the bank was keen on buying loan assets.

The bank, incidentally, had taken over the retail asset portfolio from Bank of America in 1999.

Mr Sobti had said that ABN Amro was interested only in large portfolios, of Rs 1,000 crore or more. At that time, Indian banks did not have retail assets of that size.

Asked about it, Mr Sobti today said that the bank did look at some portfolios but was not satisfied.

He also ruled out tying up with non-banking finance company or starting an NBFC to generate home loans (or, for that matter, other retail loans).

Incidentally, the Standard Chartered Bank, which has one NBFC subsidiary inherited through the takeover of ANZ Grindlays, is now thinking of starting another.

For foreign banks, for whom it is not easy to open branches, starting an NBFC is seen as a good option.

This is because NBFCs can open branches, generate loans and the bank can fund them — a model favoured by Standard Chartered.

But ABN Amro would not take that route. Instead, ABN Amro would sell its products through direct selling agents, Mr Sobti said.

Next year, ABN Amro hopes to be able to add 10 branches to its existing network of 16. It also intends to expand its global back office operations at Chennai and Mumbai, increasing the number of seats from about 1,200 to 2,400 in one year.