Three public sector lenders -- Bank of Baroda, Indian Overseas Bank, and Andhra Bank -- on Thursday entered into a joint venture agreement for setting up a banking subsidiary, India BIA Bank (Malaysia) Bhd, in Malaysia.
The subsidiary will become operational by the end of the second quarter and cater to Indian corporates and expatriates in Malaysia. In the joint venture, BOB will hold 40 per cent stake, IOB 35 per cent, while Andhra Bank will hold the rest 25 per cent. Initial investment is pegged at Rs 405 crore (Rs 4.05 billion).
"We have obtained necessary approvals from the Reserve Bank of India for setting up the subsidiary in joint venture with other two banks, and this has also been appraised to Bank Negara Malaysia.
After completion of the remaining formalities, Bank of Baroda will approach Bank Negara Malaysia for regulatory approvals to set up a banking company," said M D Mallya, chairman and managing director, Bank of Baroda. Earlier, the second-largest public sector player, Punjab National Bank, had shown interest in the venture.
"With Bank of Baroda having extensive network in central and northern India and IOB and Andhra Bank in the southern parts of the country, the subsidiary in Malaysia will be able to attract the IT-expatriate population which has migrated to Malaysia from different parts of India," Mallya said. Bank of Baroda opened its representative office in Malaysia in 2004.
With BoB and IOB already having a presence in Malaysia for some years through their representative offices, they have studied the market well and are well aware of the available opportunities for business development.
Bank of Baroda has an extensive presence in the area with branches in Hong Kong, China, Singapore and a representative office in Thailand with full-fledged branch operations in the UAE.
Malaysia has strong trading ties with these countries and the presence of Bank of Baroda will help in providing trade-related services to the customers of the subsidiary.
This will also help garnering business for the subsidiary.
India's trade with Malaysia increased by 84.32 per cent in FY07 and 30.07 per cent in FY08. During FY08, the trade between India and Malaysia was $8.58 billion and this provides an excellent opportunity for canvassing trade-related business for the proposed subsidiary, Mallya said.
