After a botched bid to take over a local bank, Bank Muscat will invest close to Rs 250 crore and will take the subsidiary route to expand operations in India.
Bank Muscat is the largest bank in Oman with a 35 per cent share of the market in that country. It has on branch in India, at Bangalore.
Under the proposed scheme of arrangement, Bank Muscat will transform its present branch in Bangalore into a locally incorporated subsidiary and will subsequently expand to all metros and cities.
In the first phase of expansion it will set up 15 branches and will expand to other cities of importance.
"This time we have decided to stay away from the merger and acquisition (M&A) route as our experience was not very encouraging," explained India head, Bank Muscat, Samit Ghosh.
"The necessary equity in the bank will be brought in by investors or partners," explained Ghosh. Muscat has initiated dialogue with partners for a probable tie-up "but things are at a very preliminary stage," he said.
"We will appoint an external consultant to advice us on the project, but that will be at a later stage when we have finalised our partners as the entire process is expected to take one year after guidelines for the route are cleared by the government of India," Ghosh said.
The bank is waiting for detailed guidelines from the Reserve Bank of India on the subsidiary route and will set the ball rolling once it is cleared by Parliament.
Industry sources said the Bill was likely to be cleared at the current session.
"We are waiting for guidelines, and will initiate the process as soon as it is cleared," said Ghosh.
Bank Muscat, which set up its first overseas branch in Bangalore in 1998, had initially firmed up plans for M&A deals to expand its presence in India.
However, it burnt its fingers while trying to take over IDBI Bank. The deal fell through because the financial institution IDBI, which has a majority holding in the bank, refused to give the assurance that it would not merge with the bank.
Subsequently Bank Muscat started negotiations with Centurion Bank but it backed out later. Now, it has decided to adopt the subsidiary route.
The bank, which provides retail banking, corporate and investment banking services, merged with the Commercial Bank of Oman in December last year. The merger made Bank Muscat the largest bank in the Sultanate of Oman.