Public sector lender Andhra Bank expects to start its banking subsidiary in Malaysia in the next three months.
“In all probability, we will register the subsidiary and start operations in two-three months,” Chairman and Managing Director RS Reddy told Business Standard.
The bank has entered into a tie up with Bank of Baroda (BoB) and Indian Overseas Bank for setting up the subsidiary, which is expected to cater to the Indian diaspora in Malaysia. The bank’s stake in the venture is 25 per cent, which comes to Rs 104 crore.
Both the Malaysian Central Bank as well as the Reserve Bank of India have given clearance for the subsidiary. With BoB already having a representative office in Malaysia, the formalities would be completed smoothly, Reddy said.
According to Reddy, the subsidiary will work as 8 per cent of the population of Malaysia, about 2.1 million people, are of Indian origin. Besides, the bilateral trade between India and Malaysia is rapidly growing and now stands at about $10 billion.
Meanwhile, IndiaFirst Life Insurance Company, an insurance joint venture (JV) of Andhra Bank, BoB and Legal and General Plc of the UK, has started sale of insurance policies through their branch outlets. Andhra Bank invested Rs 60 crore in the venture for 30 per cent stake.
A senior official of the bank said, AB had so far 19,689 policies and collected a premium of Rs 53.44 crore, earning a commission of Rs 2 crore.
The bank was expecting to earn a commission of about Rs 20 crore in the current financial year by collecting a premium of around Rs 250 crore.
With regards to Andhra Bank’s strategy of achieving annual growth rate of 25 per cent for the next five years, Reddy said with return on equity being 29.99 per cent, the bank’s internal accruals alone would help it meet the target.
Last year, he said, the bank posted a net profit of Rs 1,046 crore. After payment of dividend, over Rs 760 crore was added to the Tier-II capital, “which will support the 25 per cent growth strategy,” he said.
Andhra Bank had sought Rs 1,000 crore from the central government for which the bank would issue perpetual non-cumulative preference shares to shore up its capital. Reddy, however, said capital was not an issue as the bank already had a capital adequacy ratio of 14 per cent.
Andhra Bank plans to open 120 more branches in 2010-11, out of which 50 will be outside Andhra Pradesh.
The bank also proposes to increase the share of fee-based income in the total from 12 per cent to 15 per cent in the current year and 18 per cent in 2011-12. Last year, its fee-based income stood at Rs 965 crore.
