BoB-led consortium gets banking licence in Malaysia

A consortium of Bank of Baroda (BoB), Indian Overseas Bank and Andhra Bank has received a commercial licence from the Malaysian government to set up a locally incorporated bank, the country's central bank said today.

While Bank of Baroda will hold a 40 per cent stake in the proposed Malaysian entity, Indian Overseas Bank will hold 35 per cent equity and Andhra Bank will have the remaining 25 per cent, a statement issued by Bank Negara Malaysia here said.

The Malaysian government had recently lifted restrictions that prohibited any bank under the effective control of a foreign government from holding a licence, as part of the country's efforts to liberalise the banking sector.

Subsequently, permission was granted for new banking and insurance licences to be issued to foreign firms. So far, 15 licences have been issued for commercial banking under the new rules.

The licence issued by the Ministry of Finance to the trio of Indian banks, however, was not a new one, but a reinstatement of the commercial banking licence held previously by an Indian bank before the restrictions were imposed by the Malaysian government. This was because the proposal has been a part of the engagement between India and Malaysia since 2003, the statement said.

The presence of the new Indian commercial bank will further strengthen the economic and financial linkages between Malaysia and India. In addition, it is expected to contribute towards the overall development of a more diversified financial sector in Malaysia, the statement added.