The Hindu Business Line : IOB gets RBI nod for financial services arm

Chennai April 17 Indian Overseas Bank has secured the Reserve Bank of India's approval for starting a financial services subsidiary, the bank's Chairman and Managing Director, Mr T.S. Narayanasami, told Business Line on Tuesday.

IOB would invest Rs 50 crore in IOB Financial Services Ltd, the company that will be set up to provide services such as stock broking, depository participant, wealth management, distribution of third-party financial products and, at a later stage, investment banking, Mr Narayanasami said.

He said that IOB was okay with the idea of giving some equity stake in the company to a joint venture partner who may bring in expertise to the table.

Mr Narayanasami said that IOB would like the company to be managed by professionals, while the bank itself would keep an arms length from it.

Meanwhile, the bank has also received an approval from the RBI to open a representative office in Vietnam.

Mr Narayanasami said that IOB would soon apply to the Vietnamese authorities for permission.

Noting that the Vietnamese economy was doing very well, he observed that no Indian bank had any branch in the country.

Asked about the performance of IOB in 2006-07, Mr Narayanasami hinted at a substantial increase in profits, but did not want to go into the details pending the bank's board meeting of April 23.

He said that the credit growth was robust. To fund the growth, it was not wise to rely on only low-cost deposits. "We cannot have everything in CASA (current accounts and savings accounts)," he said, stressing that term deposits gave stability to a bank's resources.

He said that banks did not favour deregulation of interest rates on savings accounts. Deregulation, at this stage would lead to competition and consequently to an increase in cost of funds.

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