ABN Amro seeks nod for micro finance subsidiary

ABN Amro Bank NV, the Dutch banking major, is planning to set up a wholly owned subsidiary in India to foray into micro financing.

It has approached the Reserve Bank of India (RBI) to seek approval for the venture.

The RBI has forwarded the proposal to the Ministry of Finance. A senior official of the ministry said North Block is keen to respond positively to the ABN Amro application.

Moumita Sen Sarma, vice president, head- micro finance, India, ABN Amro, said "Being a foreign bank, we cannot expand our branch network though there is a huge potential for micro financing in the rural sector. This is why we have decided to set up a wholly owned Indian subsidiary."

The bank has recently signed an in-principle agreement with ShoreBank Corporation, International Finance Corporation (a World Bank arm) and a number of other organisations to establish ShoreCap International.

This $25 million commercial company will invest capital in and advise local financial institutions that do small and micro business lending in developing economies.

ShoreCap will be based in London, targeting institutions in Asia, Africa and central and eastern Europe. In Asia, ShoreCap will majorly focus India and China for its microfinance activities.

"We will look into the matter, it is great to learn that private banks like ABN Amro are interested in financing the rural sectors. The ministry will be keen to take positive action in respect of its application in this regard," said N S Sisodia, secretary, ministry of finance, here on Saturday.

In India, ABN has branches in Mumbai, New Delhi, Chennai, Kolkata, Pune, Vadodara and Surat among others. It has also got two divisions, known as ABN-Amro Corporate Finance and ABN-Amro Securities (India) Pvt Ltd delivering the investment banking services.

The bank is now providing a comprehensive range of services and is emerging as a consumer bank with the various range of products. 

A clarification

ABN Amro Bank has clarified that it has no plans to set up a separate subsidiary for its micro finance business. The bank's micro finance business remains and will continue to grow and expand as an integral part of ABN Amro Bank's business in India. 

The clarification is in response to a report published in Business Standard on September 7, which had stated that ABN Amro Bank was planning to set up a wholly owned subsidiary in India to foray into micro financing. 

The BS report was based on a comment made by a senior official of the bank. But since the bank has now officially clarified its stand on setting up a subsidiary, we stand corrected and regret the error.