Central Bank, PNB to tie up for bank in Mozambique

Central Bank CMD Tanksale says will need Rs 1,000 crore for operations this year

State-run lenders Punjab National Bank (PNB) and Central Bank of India will jointly set up a bank in Mozambique by the end of this financial year.

The move comes after the finance ministry asked government-owned banks to team up and expand presence outside India.

“We have just received the mandate from the government to set up a bank in Mozambique, along with PNB,” M V Tanksale, chairman and managing director of Central Bank of India, told reporters on the sidelines of a seminar organised by the Federation of Indian Chambers of Commerce and Industry on Friday.

“It will be either a subsidiary where we and PNB will have equal stake or a (tripartite) joint venture with a local bank in Mozambique. We are exploring all options and expect to start the bank by the end of this year.”

Tanksale did not offer details on the size of investment in the proposed bank or the nature of its businesses. “It is too early to discuss these things,” he said.

Central Bank of India also plans to open branches in Nairobi and Dubai.

On another issue, Tanksale said the public sector bank will need Rs 1,000-1,200 crore of capital in the current financial year to meet its business needs. “We will probably ask for Rs 700-800 crore from the government. The rest will be managed through internal accruals,” he said.

The bank might not be able to comply with the finance ministry’s direction to cap bulk deposits at 10 per cent of total deposits by the end of this year, he said. The ministry has also said from 2013-14, the ceiling will be increased to 15 per cent, and will include certificates of deposit.

The move came after lenders led by government-owned banks scrambled to mobilise these high cost deposits to finance their business growth. Industry players said it also reduced banks’ ability to lower their lending rates, as the cost of funds went up.

“The share of bulk deposits in our total deposits is around 29 per cent. So, we may not be able to reduce it to 15 per cent within this time,” Tanksale added.