The Hindu Business Line : BoB, IOB, Andhra Bank to set up subsidiary in Malaysia

Joint venture pact: (From left) Mr S.A. Bhat, CMD, Indian Overseas Bank; Mr M.D. Mallya, CMD, Bank of Baroda; and Mr R.S. Reddy, CMD, Andhra Bank, after signing the agreement in Mumbai on Thursday.

Our Bureau

Mumbai, June 4 Bank of Baroda, Indian Overseas Bank and Andhra Bank signed here on Thursday a joint venture agreement for setting up a subsidiary in Malaysia — India BIA Bank (Malaysia) Bhd.

The agreement was signed by Mr M.D. Mallya, Chairman and Managing Director, Bank of Baroda; Mr S.A. Bhat, Chairman and Managing Director, Indian Overseas Bank; and Mr R.S. Reddy, Chairman and Managing Director, Andhra Bank.

Bank of Baroda will hold 40 per cent stake in the venture, Indian Overseas Bank 35 per cent and Andhra Bank 25 per cent. The initial paid-up capital of the subsidiary will be Rs 405 crore.

Necessary approval has been obtained from the RBI while the approval from Bank Negara Malaysia is awaited. The bank would set up its first branch in Kuala Lumpur. Once the subsidiary is established, the representative offices of BoB and IOB in Malaysia would cease to exist.

“We should be able to start full-fledged banking operations in Malaysia in the current financial year. This is probably the first of its kind joint venture wherein three strong public sector banks are joining forces to float a banking subsidiary overseas,” said Mr Mallya.

Mr Bhat pointed out that the minimum regulatory capital to set up a banking arm in Malaysia was high at around $80 million and this could result in blockage of capital if a bank was to foray on its own.

With three banks coming together to float the subsidiary, the capital burden is spread out.

Mr Reddy said the initial target group will be Indian corporates and the ethnic Indian population. Need was felt by this section for an Indian bank to meet its banking requirements and remittances to India.

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