BoB to merge home loan arm this year

Bank of Baroda (BoB) expects to merge its subsidiary BOB Housing Finance with itself in the current financial year as both entities are in the same business.

An anomaly in the current arrangement is that BoB Housing also has to rely on BoB to raise funds for its business.

On the sidelines of a roadshow for the bank's follow-on equity issue, A C Mahajan, executive director, said, "We are in talks on the price to buy the National Housing Finance's 33 per cent stake in the housing subsidiary." The merger is expected to be finalised before March 31, 2006.

Mahajan said that BoB was aggressively marketing housing loans, which account for a significant percentage of the its retail portfolio.

BoB Housing Finance's loan portfolio has sharply fallen over the last two years. For 2004-05, it had garnered about Rs 354.5 crore compared with Rs 471.9 crore in the previous year. In 2002-03, housing loans stood at Rs 589.9 crore.

The housing finance arm will have to borrow from the market as well as its parent to fund advances, thus making cost of funds and interest rate charged more expensive.

The bank will also take a look at restructuring its subsidiaries such as BOB Asset Management Company, BOB Capital Markets and BOB Cards.

The bank has undertaken feasibility studies for opening a representative office in Australia. BOB is awaiting host country approvals for opening branch in Houston, US, Bangaldesh, Maldives and Hong Kong and an overseas banking unit in Singapore.

At present there are seven overseas subsidiaries in Bostwana, Kenya, Uganda, Hong Kong, Guyana, UK and Tanzania.