MahaBank gets nod for 3-way Malaysia JV

Bank of Maharashtra (MahaBank) has got board approval to enter Malaysia through a three-way partnership with Bank of Baroda (BoB) and Oriental Bank of Commerce (OBC).

MahaBank has got an in-principle approval for the proposal, said the bank in a notice to the Bombay Stock Exchange.

Bank of Baroda already has a representative office in Kuala Lumpur and the three banks plan to convert it into a locally registered subsidiary.

This is a part of Bank of Baroda's larger gameplan to enter into strategic alliances with banks at domestic and international levels. BoB already has a strategic alliance with a Zambian Bank, called the Indo-Zambia Bank Ltd.

The need for a partnership was triggered by the high capital requirements that the Malaysian central bank has imposed on foreign banks entering the country. Last year, the Malay central bank upped the capital requirement sharply from ringgit 30 million to ringgit 300 million.

The intention of the Malaysian government is to encourage only strong foreign banks to enter the country so that they have the appetite to take over existing private banks.

India and Malaysia have a bilateral trade worth $4 billion. The new subsidiary is planning to focus on trade-related business, besides the 2.2 million people of Indian origin.

Once the board approvals of all the three banks are in place they will have to approach the Reserve Bank of India and the Malay Central Bank.

Of the three banks, only BoB has 57 offices in 19 countries and one joint venture. It has an overseas balance sheet of $3.2 billion and international operations contribute about 15 per cent to BoB's overall business and to 20 per cent of its profits.

In 2006, BoB plans to expand its footprint from 19 to 25 countries. Unlike the State Bank of India and Bank of India, BoB wants to grow organically since it finds inorganic growth expensive.

BoB has applied to the RBI to open its maiden branches in Bangladesh, Canada, Maldives, New Zealand, Sri Lanka, Trinidad and Tobago and Singapore.