Kotak Mahindra Plans Maiden Foreign Branch In Singapore

20 June, 2011

Kotak Mahindra Bank plans to open its maiden overseas branch in Singapore and has applied for a licence to the Reserve Bank of India (RBI), a senior official said on Monday, as it looks to tap the overseas banking requirements of Indian firms.

“We have applied for an international branch to the RBI. We would like to set up our first branch in Singapore,” C. Jayaram, executive director of Kotak Mahindra Bank told Reuters, but declined to give a time frame.

After the bank obtains the RBI nod, it will have to get an approval from the Monetary Authority of Singapore, he said.

Indian banks have been expanding in overseas markets to tap into the growing need for financing by Indian corporates as well as to offer a wide range of banking services to non-resident Indians.

Kotak Mahindra’s bigger rival ICICI Bank, India’s No. 2 lender, said in March last year its Singapore branch had received approval from the regulator to launch full banking services in the city state.

Local Reach

Kotak Mahindra is also planning to expand its branch network in India and the bank will have more than 500 branches by April 2013, compared with 321 branches as on March 31, Jayaram said.

“We have a branch expansion plan, for which I think we are in the last stage of getting permission from the Reserve Bank of India,” he said.

Kotak Mahindra is on track to achieve its credit growth target of about 30 per cent for the current fiscal year to March 2012 despite high interest rates, he said, helped by its smaller base and as it expands network to tap new clients.

“We had given guidance close to 30 per cent (growth in credit). We have, at this point of time, nothing to change,” said Jayaram.

The RBI had forecast in May credit would grow 19 percent and deposits by 17 per cent in 2011/12.

However, loan growth has remained almost flat so far in the current financial year, reflecting signs of moderation in the overall growth outlook. Bank loans grew a mere 1.1 percent since March end, while deposit accretion remained robust at 3.3 per cent.

The RBI raised interest rates last Thursday for the 10th time since March 2010 and said it will persist in its battle against stubbornly high inflation, downplaying worries about slowing growth in Asia’s third-largest economy.

The private lender, which is looking to grow its business from the corporate sector, expects some softness in net interest margins (NIM), a key gauge of profitability, in this fiscal.

“We are growing corporates faster than the regular book, which would in effect mean that you take some pressure on the margin,” Jaimin Bhatt, group chief financial officer at Kotak Mahindra said, separately.

“We had a NIM last year of 5.6 per cent. We would expect that to soften,” he said, but declined to give a forecast.

The corporate sector accounted for slightly less than 30 per cent of the bank’s total advances at March end. The bank expects it to grow to a third of its loan book, Bhatt said.

Shares in Kotak Mahindra, which the market values at about $7 billion, ended 1.5 per cent lower at 433.25 rupees on Monday in the Mumbai market that fell 2 per cent. The stock is down 4.5 per cent this year.


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Kotak Mahindra Plans Maiden Foreign Branch In Singapore

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