Sbi, Canara To Float Bank In Moscow
State Bank of India (SBI) and Canara Bank have decided to jointly float a bank in Moscow, the first such overseas venture between two nationalised banks.
"We expect the operations to start in another six months," Canara Bank's divisional manager, N V Nayak, said. While SBI will hold 60 per cent of the stake, the rest will be with Canara Bank. The initial capital will be around $20 million.
The bank, which will be called Commercial Bank of India, will carry out wholesale banking and trade finance operations. "The entity is basically for Indo-Russian trade," Nayak said. The possibility of carrying out retail banking operations will be examined later.
Both SBI and Canara Bank currently have representative offices in Moscow and the joint venture bank will help in consolidating both the banks' operations.
Nayak said the joint venture bank expects to break even within the first year of operations itself because of the enormous business potential which Russia offers. He said the ratio of profit sharing will depend upon on the risk taking ability of each bank.
While the chief executive of the bank will be a SBI nominee, the deputy chief executive will be from Canara Bank. As per the employment policy of Russia, for every overseas employee, a foreign company should hire three Russians in the organisaion. Hence six Russians will be employed in the new bank. The total strength of the bank will initially be eight.
Nayak said Canara Bank was keen to tie up with another nationalised bank instead of setting up its own branch because Russia was perceived as a high-risk country. With SBI's presence in Russia being strong because of the defence contracts handled by its representative office, it was felt that that a joint venture operation would lead to better business.
Nayak said that with S & P according a better rating for Russia, and the country's business climate improving, there was immense business potential to be tapped.
Canara Bank has only one overseas branch which is in London in the UK. Its operations there mopped up profits of around Rs 16 crore during 2000-01. It has offices in Hong Kong and has tie ups with local dealers in the Middle East.
Global business of Canara Bank has increased to Rs 90,136 crore registering a year on year growth rate of 21 per cent.
This comprised Rs 61,517 crore of deposits and Rs 28,619 crore of advances. During the first six months of the current fiscal year, Canara Bank posted a net profit of Rs 305 crore compared with Rs 125 crore during the same period last year.
For 2000-01, the bank posted a net profit of Rs 285 crore. Canara Bank has 2,407 branches in the country.