Doha Bank board outlining its expansion strategy to the shareholders yesterday.

By Santhosh V Perumal/Business Reporter

Doha Bank, which is set to a start full-fledged branch in India in eight months, is inclined towards establishing a wholly-owned subsidiary (WOS), a route the country’s regulator Reserve Bank of India (RBI) has been pushing hard for. Moreover, the Qatari lender is also open to acquisitions because of the time taken to achieve “organic” growth in the estimated Rs80tn Indian banking sector.

“We will not rule out if there is a bigger opportunity. That will be our next step,” Doha Bank Group CEO R Seetharaman said in Doha on the sidelines of its annual general assembly meeting.

When asked specifically whether the bank was looking towards having WOS in India, he categorically said “yes.”

Seetharaman’s assertion comes at a time when many foreign banks remain unclear on how the WOS route will play out as priority sector lending as well as setting up and operating rural branches pose challenges, as elicited by a PricewaterhouseCooper India survey.

Foreign banks operating in India before August 2010 have the option of continuing as branches. “However, they will be incentivised to convert into WOS because of the attractiveness of the near-national treatment afforded to WOS,” according to the RBI.

Foreign banks operating as subsidiaries would be required to earmark 40% of their lending to “priority sector,” which includes underserved parts of the economy and agriculture, the same obligation as for domestic lenders and in line with a rule being phased in for existing foreign banks with 20 or more branches.

The rules (regarding WOS) issued by the RBI in November 2013 could expand opportunities for international banks in India since they would have greater freedom to open branches and be able to participate more in the development of the country’s financial sector.

Lord Turner, former chairman of the UK’s Financial Services Authority, had early this year said that for India, “the best option is to have a very open attitude to foreign direct investment from foreign banks and to treat the foreign banks on an equal basis with local lenders provided overseas banks operate as subsidiaries.”

Highlighting that the board has empowered the management to look at options, in addition to having an organic growth, Seetharaman said they have asked to explore whether the bank can buyout any lucrative opportunities.

Doha Bank, which will open a branch in Mumbai, is planning to target the growing retail sector because of the huge opportunities, especially in the electronic banking.

“When you identify something, there is always possibility to go for expansion in multiple forms,” Seetharaman said, adding as the organic growth will take time (in India), so “we are looking at the market space and as and when we get an opportunity we will definitely go about it (acquisition).”

The shareholders approved the acquisition of one or more branches of a foreign bank operating in India (to utilise the licence obtained by Doha Bank from the competent Indian authorities to practice banking activities), according to its chairman Sheikh Fahad bin Mohamad bin Jabor al-Thani.

Foreign banks account for less than 1% of India’s total branch network, about 7% of the total banking sector assets and a sizeable 11% of profits as on March 2013. India’s banking system is dominated by state banks, which accounted for more than two-thirds of the sector’s assets at the end of March 2012, the latest RBI data showed.

On the domestic operations, Seetharaman said two more branches outside Doha would be opened this year.

New board members elected unopposed

Doha Bank has elected unopposed its new board of directors for the next three-year term (2014-16).

The members are Sheikh Abdullah Mohamed Jabr al-Thani; Sheikh Abdul Rahman bin Mohamed bin Jabr al-Thani; Sheikh Fahad bin Mohamed bin Jabr al-Thani; Ahmed Abdul Rahman Yousif Obaidan; M/s Jasim and Falah Trading and Contracting Company, represented by Sheikh Falah bin Jasim bin Jabor al-Thani; M/s Al Khaleej Takaful Group, represented by Khalid Abdulaziz al-Baker; Hamad Mohamed Hamad Abdullah al-Mana and Ahmed Abdulla Ahmed al-Khal.

This was announced by Doha Bank chairman Sheikh Fahad after the annual general assembly meeting, which approved the financials and 45% cash dividend for 2013.

“We are still optimistic about the future where we anticipate that Qatar will witness exceptional boom in all economic sectors with subsequent launching of many development projects in the coming years that will reflect positively on the performance of the banking industry in Qatar in general and of Doha Bank in particular,” Sheikh Fahad said.

He said the future plan included the effective implementation of effective risk management strategy at both local and international levels, improving banking services delivery channels, diversifying income sources and strengthening the financial position with a view to achieve the highest level of effective operational efficiency.