Exim may ink pact with BoB to fund firms' overseas buys

Export-Import (Exim) Bank of India is in the final stages of signing a formal agreement with Bank of Baroda (BoB) for co-financing overseas acquisitions by Indian corporates. Similar agreements are also being finalised with State Bank of India (SBI) and Bank of India (BoI).

These public sector banks with presence overseas are entering into arrangements with Exim Bank to capitalise on the Reserve Bank of India's (RBI) recent permission to commercial banks to fund overseas buyouts by Indian companies. Exim Bank, in co-ordination with these banks, has identified immense potential for such joint funding.

"With the RBI green signal, commercial banks are now keen on tapping the business of financing foreign acquisitions by Indian entities. Since Exim Bank was, till recently, the only financial institution allowed to finance overseas buyouts, our expertise would come in handy for these banks," said T C Venkat Subramanian, chairman and managing director, Exim Bank. Venkat Subramanian said Exim Bank plans to ultimately form a consortium of state-owned banks to facilitate sharing of risks.

The overseas branches of these public sector banks will also be able to cater to the working capital requirements of these corporates. Exim Bank plans to tap the co-financing potential in countries where these banks have a presence. SBI has 52 foreign offices in 34 countries, including Australia, Canada, Hong Kong, South Africa, UK, US, Germany and Russia.

Bank of Baroda has 59 offices in 21 countries.The bank recently opened representative offices in Malaysia, China and Thailand. Bank of India has, till date, opened 23 branches in seven overseas locations, such as Japan, France, Vietnam and Kenya.

Subramanian said Exim Bank's arrangements with domestic banks having overseas branches will help smoothen cross-country transactions, including getting payments for goods exported from India.

The bank had earlier undertaken co-financing of deals in the US and Indonesia jointly with SBI and Standard Chartered Bank. Exim Bank would, however, decide on a case-to-case basis on engaging foreign banks.