By Santhosh V Perumal
Doha Bank, which is planning to upgrade its branch set up in India into a wholly-owned subsidiary (WOS), yesterday received approval from shareholders to acquire HSBC Bank Oman’s operations in the South Asian country for about QR75mn.
The bank, which is aiming 30% of its net earnings from overseas operations, has chosen to acquire the tailor-made portfolio, in view of the time taken to achieve organic growth in the estimated Rs80tn Indian banking industry.
“India is a destination and it represents business opportunities,” Doha Bank Group CEO R Seetharaman told the media on the sidelines of extra-ordinary general assembly, where shareholders accorded their approval.
As per the terms, Doha Bank will make a single lump sum amount of Rs1.28bn (QR75mn) to HSBC Bank Oman, whose Indian branches — Mumbai and Kochi — together has assets to the tune of Rs3.4bn (QR200mn) and deposits of Rs1.17bn (QR70mn). (The exchange rate has been assumed at the latest figure of Rs17 to one riyal.)
HSBC Oman’s India operations have about 30 staff to serve 2,900 customer relationships. Foreign banks account for less than 1% of India’s total branch network, about 7% of the total banking sector assets and a sizeable 11% of profits as on March 2013.
India’s banking system is dominated by state-owned banks, which accounted for more than two-thirds of the sector’s assets at the end of March 2012, the latest Reserve Bank of India (RBI) data showed.
Doha Bank — which is also inclined towards establishing WOS, a route RBI has been pushing hard for — is eyeing the growing retail sector because of the huge opportunities, especially in the electronic banking.
Many foreign banks remain unclear on how the WOS route will play out as priority sector lending as well as setting up and operating rural branches pose challenges, as elicited by a PricewaterhouseCoopers India survey.
However, Seetharaman said Doha Bank did not have any capital/capacity constraints to scale up its present branch operations into a WOS. “It is our long term vision,” he said, adding it will all depend on the growth of the Indian operations.
India’s growth is intact at 5.3% (last quarter) and its trade with Gulf countries amounted to $170bn; which itself present opportunities for the banking sector, he said.
To a query on whether the current trough in oil prices will lead to cutting down of projects in Qatar, Seetharaman said he did not expect to see it.