BOI to infuse $32 mn in its Indonesia subsidiary

Public sector lender Bank of India is infusing $ 32 million into its subsidiary in Indonesia - Bank of India Indonesia (BOII) Tbk to shore up capital adequacy to support business expansion including foreign exchange activity.

PLR Iyer, chief executive at BOI told Business Standard that banking regulator in Indonesia has revised norms for capital adequacy to open more branches, provide internet banking services and continue to be in trade finance space.

At present capital base is about $ 45 million and would grow to over $ 80 million after equity infusion by shareholders. Bank would firm up business plans and present them to regulator soon.

BOI holds 76% stake in subsidiary listed on stock exchange in Indonesia while public holding is about five% and non-residents another two%. PT Banca Mantra Jaya has 17% stake, according to annual report for FY2013. Bank follows a January-December as a financial year.

Its capital adequacy ratio (CAR) was at 15.28% at the end of 2013, experiencing a decline compare to the 2012 CAR at 21.10%, though remained above the minimum level as stipulated by banking regulator Bank Indonesia at 8%.

The drop in CAR was primarily caused by the substantial credit expansion in 2013, according to BOII's annual report its outstanding loan book stood at about $ 400 million at end of September 2014. Bank has been growing loan book by over 20% annually.

While India linked business has significant share, it also does large volumes in local currency as well. While bank would continue to expand loan book, it would follow a strategy of consolidation. The thrust would be on non-interest income which would help to improve returns on resources and capital, Iyer said.

BOII has 19 offices including 14 branches and over 300 employees.