BoB to shut HK arm, open branch

Bank of Baroda (BoB) will close down its Hong Kong subsidiary and open a branch to take advantage of the growing business between India and China. It has sought the Reserve Bank of India's approval for setting up the branch.

"By setting up a branch, we will be able to service a lot more Indian businesses in China, which use Hong Kong as their hub," said A S Khurana, general manager (international & treasury).

Improved Indo-China relations has seen a number of Indian companies setting up shop even as trade volume in 2003-04 rose by 54 per cent to $7.597 billion.

The current norms for banks operating in Hong Kong do not permit banks to lend more than 25 per cent of its capital to a single borrower.

BoB (Hong Kong) Ltd has owned funds of Rs 99.78 crore and total assets amounting to Rs 292.15 crore. "This limits the amount of funds we can lend. Since we are now allowed to set up branches in Hong Kong following the hand-over to China in 1997, we have decided to open a branch and close down our subsidiary there," said Khurana.

Though BoB opened a representative office in Guangzhou in June this year, the Chinese government does not permit opening of branches in the country. "Our global expansion thus depends upon regulatory approval and studying the potential of individual markets," said Khurana.

There are some old losses at BoB's Hong Kong subsidiary, which will be adjusted and written off once the branch is established, said Khurana.

"The advantage of a branch is that we need not transfer or assign capital for a subsidiary overseas, which would also limit the amount of business we can undertake. This is provided that local regulations permit establishment of branches, whereby we can use our global balance sheet," added Khurana. BoB's total capital plus reserves amounts to $ 1.2 billion today.

BoB has 61 overseas offices in 17 countries.