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Rediff.com  » Business » S African banks plan Indian arms

S African banks plan Indian arms

May 10, 2005 09:46 IST

FirstRand Bank and Standard Bank, two leading South African banks, are planning to set up shop in India. Confirming this, XP Guma, deputy governor, South African Reserve Bank, said FirstRand Bank and Standard Bank were closely looking at a presence in India.

Referring to the strong regulatory environment in India, Guma told Business Standard in Pretoria, "It makes our life easier as a more regulated environment helps us keep an eye on our banks."

Since the Reserve Bank of India came out with a road map that increases the opportunities for foreign banks, a number of global banks have shown interest in entering the Indian market.

Raiffeisenlandesbank Oberosterreich, one of Austria's largest banks, has already applied to the RBI for permission to appoint a consultant in the country and has received a no-objection letter from the regulator for this.

GE has disclosed its plans to set up a bank in the country. Some Middle East banks have given out mandates to consulting firms to examine the opportunity of the subsidiary route.

Standard Bank has a large footprint in South Africa and operates in 17 African countries and 21 countries on other continents, including Europe, the Americas and Asia.

FirstRand Bank too has a large presence in the African continent and in some international markets. Its total assets in South Africa amounted to $68.73 baillion in the year ended June 2004.

The five domestic South African banks -- Absa, Standard Bank, FirstRand Bank, Investec and Nedcor -- account for 87.4 per cent of the South African banking sector, Guma said. The deputy governor believes that the expansion of banks overseas and the entry of more banks in South Africa will help improve efficiency.

Earlier this year, the RBI came out with a final roadmap for foreign banks, enabling them to operate as wholly owned subsidiaries or acquire up to 74 per cent of the equity of private banks.

Foreign banks setting up wholly owned subsidiaries will need to have a minimum capital requirement of Rs 300 crore (Rs billion), the revised norm for private banks, and ensure sound corporate governance.

Wholly owned subsidiaries will be treated on a par with the existing branches of foreign banks for branch expansion with the flexibility to go beyond the existing World Trade Organisation (WTO) commitments of 12 branches in a year and preference for branch expansion in under-banked areas.
Freny Patel in Johannesburg