Trio of Indian lenders win Malaysian bank licence

Trio of Indian lenders win Malaysian bank licence

Malaysia will grant a commercial banking licence to a trio of Indian lenders as it gradually opens up its finance sector to more international competition.

A single permit will be issued to a new locally incorporated lender that will be jointly set up in Malaysia by Bank of Baroda, Indian Overseas Bank (IOB) and Andhra Bank, the country’s central bank, Bank Negara Malaysia (BNM) said in a statement on Friday. The presence of the new Indian commercial bank will further strengthen the economic and financial linkages between Malaysia and India, BNM said.

IOB is returning to Malaysia after the state-linked lender’s previous licence was withdrawn because of its government ownership. A requirement prohibited any commercial bank under the effective control of a foreign government from holding a permit.

Malaysia and India have been discussing the issue since 2003, said BNM. IOB will have a 35% stake in the new joint venture, which hasn’t been given a name yet. Bank of Baroda will own 40% and Andhra Bank will have a 25% stake, it said.

The central bank views this as a reinstatement of a licence. As such, it’s not part of the quota of new licences to be granted to foreign lenders. The southeast Asian nation will give as many as nine new financial-services licences to overseas firms, Prime Minister Najib Razak said in April 2009.

Industrial and Commercial Bank of China Ltd was the first overseas firm to be awarded a Malaysian bank licence in nine years when it was granted a permit in November. As it was under a special bilateral agreement with Beijing, it was also not part of the quota.

Stephanie Phang in Singapore also contributed to this story.