Three public sector banks, Oriental Bank of Commerce, Bank of Baroda and Bank of Maharashtra, are planning to join hands to enter the Malaysian market.
While the boards of the banks are yet to approve of the idea, the plan is to set up a locally registered subsidiary in Kuala Lumpur, Malaysia.
The three were joining hands as banking regulations in Malaysia required high capital to start with, sources said. Last year, the Malay Central Bank upped the capital requirement ten-fold from ringgit 30 million (around Rs 34.6 crore) to ringgit 300 million (Rs 346 crore).
The intention of the Malaysian government is to encourage only strong foreign banks to enter the country so that they have the appetite to take over the existing banks.
"The subsidiary will be owned equally by the three banks. To set the ball rolling, we will first have to take board approvals," said a Bank of Maharashtra executive. Once the boards approve, the banks will have to approach the Reserve Bank of India and the Malay Central Bank.
Bilateral trade between India and Malaysia added up to $4 billion last year. The new subsidiary is planning to focus on the trade-related business. There will also be interest in the 2.2 million people of Indian origin there.
As of now, Bank of Baroda is the only Indian bank to have a presence in Malaysia, by way of a representative office in Kuala Lumpur.
This is part of Bank of Baroda's larger gameplan to enter into strategic alliances with banks, both at the domestic and international levels. It has a strategic alliance with a Zambian bank in the Indo-Zambia Bank Ltd.
Bank of Baroda has 57 offices in 19 countries and one joint venture. It has an overseas balance sheet of $ 3.2 billion and international operations contribute about 15 per cent to its overall business and to 20 per cent of its profits.
In 2006, Bank of Baroda is planning to expand its footprint from 19 to 25 countries. Unlike State Bank of India and Bank of India, BoB is aiming to grow organically since it finds inorganic growth too expensive.
BoB has recently applied to the RBI to open its first branches in Bangladesh, Canada, Maldives, New Zealand, Sri Lanka, Trinidad and Tobago and Singapore.
Towering ambition