Rabobank tweaks plan for India presence

The Rabobank Group, a Netherlands-based cooperative financial services provider, has changed its India strategy, with plans to set up banking operations in the country and seek dilution of its stake in Yes Bank, a three-year-old private sector bank. Rabobank currently has direct presence in India through a non-banking finance company (NBFC), Rabo India Finance (RIF).

The Dutch bank, the only global bank with a triple-A rating, however, cannot seek to start operating as a bank in the country as long as it has a stake in Yes Bank. Rabobank, along with Yes Bank promoters Rana Kapoor and Ashok Kapur, has a lock-in till March 2009 for its holdings in the Mumbai-based private sector bank. To overcome this handicap, Rabobank plans to scale up the operations of RIF till it gets to be present in the country as a bank, according to sources.

Rabobank currently owns over 19 per cent stake in Yes Bank. Earlier, it had sought the Reserve Bank of India's (RBI) permission to raise its stake in Yes Bank to 20 per cent after the bank's initial public offer a year ago. Rabobank's corporate communications officials at the group headquarters and in India did not respond to an email query sent last week on the group's plans to operate as a bank in India and seek dilution of its stake in Yes Bank.

Yes Bank Managing Director and CEO Rana Kapoor said, "Rabo is just a financial investor in Yes Bank. We do not see it as a partner in the medium or longer term, given the fact that it is (already) operating through an NBFC here and that it has plans to set up banking operations.''

According to RBI regulations, a financial services provider cannot be a bank in India independently and simultaneously hold a substantial stake in another bank.

Rabobank's stake would get diluted as Yes Bank raises fresh capital. "We are planning to raise $210 million by way of equity and debt capital. This fresh capital infusion will dilute Rabo's holding in the bank,'' said Kapoor.

The sources said, "Rabobank can enter India as a bank either through the direct branch banking route or by converting the existing NBFC into a bank. The (Rabobank) management is planning to step up its business through the NBFC in India. The strategy is to build a strong business under the NBFC arm and then convert it into a bank."