P. S. Suryanarayana

Singapore, Jan. 11

INDIAN Overseas Bank (IOB) has opened a Representative Office in Kuala Lumpur. In an interview to

Business Line

in Singapore, the IOB Executive Director, Mr A.R. Nagappan, said the office could help accelerate the bank's Singapore operations too. Excerpts from the interview:

What was the need for a Representative Office instead of a full-fledged branch?

We have opened a Representative Office after a gap of 33 years. We were in Malaysia since 1941. We left in 1973. So, when we go back after such a long gap, we thought it is better to go as a Representative Office and then upgrade it as a branch after building a reasonable amount of portfolio through our Singapore operations.

When you had left Malaysia in 1973, was it as part of that combination of IOB, Indian Bank and UCO?

By choice, we did not leave. We had to leave because of the policies of the (Malaysian) Government (which) felt that a foreign bank can operate, but not a bank owned by a foreign government.

When our banks were nationalised in India, that put a restriction on our operations in Malaysia. So, instead of closing down, the branches which were established for the benefit of the people from India (who were) living and doing business in Malaysia, we thought it was useful to retain them in some form.

UCO Bank, Indian Bank and Indian Overseas Bank came together and all (their) branches (in Malaysia) were merged. A new bank was formed, called United Asian Bank Bhd. It was a special and specific arrangement (which) now got transformed into Bumiputra Commerce Bank (after being) taken over (in Malaysia). Twice, thrice, some mergers were taking place in that bank.

Immediately after the formation United Asian Bank Bhd, in 1973, the chief executive position was on a rotation basis among the three (Indian) banks. After that (when it was taken over), we only held the shares of this bank. The entire management and control was with the local executives.

Right now, there is no Indian participation (in the Bumiputra Commerce Bank)

All the (Indian) banks have exited with their shares at the appropriate time.

From IOB's point of view, apart from being some kind of an economic shock, did the exit lead to any loss?

No. But it has got an emotional aspect also. That we were there for so many years (with) so many branches operating in Ipoh, Malacca, Penang and Kuala Lumpur. (The exit) did not have a big financial implication for the bank. Now, you look back. Malaysia has also grown economically. It has become a much stronger nation than what it was 33 years before. Had we been there (during this period), our position would have been slightly better. Now, we are re-starting once again. UCO and Bank of India opened representative offices (between 2-14 months before IOB's latest venture).

How is IOB's Representative Office in China doing?

We opened the office in July (2005). In China, for a representative office there are a lot of restrictions. It is more to test the waters, whereas in Malaysia a representative office can function as a kind of contact point, as a business acceleration point for the Singapore operations.

With a number of Indian banks still being nationalised ones, how is Malaysia now accepting you back into the fold?

Capital requirement is quite steep, Malaysia prefers off-shore banking coming in. But, we thought, we will have a presence over there, because a comprehensive economic cooperation agreement is likely to come up between India and Thailand as well as Malaysia.

Has IOB done any studies about the potential for banking industry in Malaysia?

We have not done any study, but we are quite bullish about it on the basis of our past experience itself. (Also) banking has no barriers.

You have a full-fledged branch in Seoul ..

Yeah. We had a branch in Bangkok. That also we had to give up the way we had to in Malaysia. So, we promoted Bharat Overseas Bank and hived off the Bangkok Branch to Bharat Overseas Bank (which) had a private character. They (the branch) are still operational.

With Singapore as the main base of your operations in this region ..

We are here from 1937. Our Hong Kong operations are slightly bigger than Singapore.

IOB has applied for full-fledged operations in Singapore..

We have approached the Monetary Authority of Singapore (MAS). We have made our presentation for upgrading ourselves for full-fledged qualified bank licence. We (already) have very strong, steady, operations over here. It is a profitable branch. Net NPA is nil in Singapore for us.

What about promoting investments in either direction, Malaysia-India, Singapore ..

[With] the kind of interest industrialists from Singapore are showing in India these days, naturally, we will be funding them in India with rupee-funds if they require. (For the) Indians working in Singapore, we have opened a Remittance Centre in Little India. We are thinking of one more remittance centre in Singapore, and we are also keen to have the Asian Clearing Union permission from MAS.

(This article was published in the Business Line print edition dated January 12, 2006)
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