Bank Muscat, the largest bank in Oman with 35 per cent market share, is going slow on due-diligence at Centurion Bank, since it is examining the proposal of setting up subsidiaries in India instead of taking over an existing bank in a bid to expand its operations.
"We are waiting for the detailed guidelines from the Reserve Bank of India (RBI) in this regard," said the India head of Bank Muscat, Samir Ghosh.
"Taking over an existing bank has its pitfalls for with the bank one also inherits a lot of inherent problems including the non-performing asset (NPA) problem," explained Ghosh.
Although a buyout delivers ready infrastructure when a bank is taken over, the buyer would also inherit a lot of problems that might come in the way of smooth operation.
Setting up subsidiaries from scratch would require effort and investment, but the new entity would be free to conduct business its way.
"If guidelines issued by Reserve Bank of India are favorable we will opt for the subsidiary route rather than take over a bank," Ghosh informed.
Due diligence at Centurion Bank was not over and Bank Muscat would rather wait for guidelines from the Reserve Bank of India than rush into Centurion Bank. "Although we have kept our options open we are heavily banking on the subsidiary route," he explained.
Bank Muscat, which set up its first overseas branch in the southern Indian city of Bangalore in 1998 with the hope of growing through tie- in India, burnt its fingers while trying to take over IDBI Bank.
The tie-up fell through because, IDBI Ltd, the principal promoter of IDBI Bank, refused to give an undertaking that it would merge the bank with itself and dilute the Bank Muscat's stake.
The bank, which provides retail banking, corporate and investment banking services, merged with the Commercial Bank of Oman in December last year. The merger made Bank Muscat the largest bank in the Sultanate of Oman.
