Domestic banks are exploring the possibility of joint ventures to tap business overseas. This is to meet the high assigned capital requirement for setting up branches in developed countries.
Bank of Baroda, which has a strong presence overseas, plans to open a representative office in Malaysia, its general manager A S Khurana said.
The bank could enter into a joint venture with other public sector banks to meet the high capital adequacy requirement in Malaysia, he added.
Banks operating in Malaysia have to maintain a capital base of $70 million -- a lot higher than the $3-7 million in other countries.
In 1984, the bank had entered into a joint venture with Government of Zambia, Bank of India and Central Bank of India.
The Government of Zambia holds a 40 per cent stake in the Indo Zambia Bank, the remaining 60 per cent stake being held by BoI, BoB and Central Bank of India.
BoI is also planning to expand in Latin America and Africa and will look for joint ventures to develop its business, a senior official of the bank said.
He explained that when a bank establishes its branches abroad it is good to share the risk. BoI has 18 branches overseas and three representative offices in Vietnam, Jakarta and China.
A senior official with a private bank said that, with corporates setting up ventures overseas, it has become imperative for Indian banks to set up branches overseas.
To compete in the domestic market, banks need to go global to service their corporate clients and meet their cross-border needs, he added.
The possibility of banks getting into joint ventures depends on their business strategy, said ICICI Bank senior general manager and head international banking group, Bhargav Dasgupta.
ICICI Bank's overseas branches are 100 per cent subsidiaries as the bank likes to have total control on its operations, he added. The bank will shortly open an offshore branch in Bahrain.
At present, ICICI Bank has one branch in Singapore, an offshore banking unit (OBU) in Seepz (Mumbai), a subsidiary in London and representative offices in New York, Dubai and Shanghai.
Though the bank is reluctant to enter into a joint venture, ICICI Bank has forged alliances with local partners to build up volumes.
The bank has linked accounts with Emirates Bank and Commercial Bank of Qatar in the Middle East. It has an alliance with Bank of Montreal in Canada, Wells Fargo in the US and DBS in Singapore for remittances. It also has linked accounts with Lloyds Bank in the UK.
