India’s Minister of State for Finance, Namo Narain Meena formally inaugurated Bank of Baroda New Zealand’s operations at its premises on Auckland’s Dominion Road on Friday morning.
Also attending the opening ceremony and celebrations was M D Mallya, the Chairman and Managing Director of the bank’s Indian parent, Bank of Baroda and its General Manager for overseas operations V H Thatte, among hundreds of members of the Indian and Fijian Indian communities.
Sanskrit prayers were chanted before the minister cut the ribbon. The premises was then blessed in Hindu and Maori tradition.
Though the bank’s services were soft launched in June last year, its full fledged services were made operational this week. The bank gained popularity over the past six months mainly because of its money transfer service to India, which offers instant money transfers to any branch in India and transfers with only a few hours delay for accounts in other Indian bank branches.
Speaking to Indian Weekender shortly after the formal inauguration, Mr Mallya said the Indian community’s response to the bank since the soft launch was encouraging. “At this rate, I am sure the bank will soon establish new branches in the country.” He indicated that the next branches were likely to be opened in South Auckland, followed by Wellington and Christchurch.
Bank of Baroda is India’s second largest bank and the only Indian bank in New Zealand. It is the only Indian bank in 10 of the 26 countries where it has established operations since its first foreign foray in Kenya in 1953. It established in Fiji fifty years ago.
In its hundred plus year history the bank never recorded a loss, Mr Mallya said. Details of the bank’s many achievements were detailed in speeches following the inauguration: the bank has 84 offices in 26 countries, some 3300 branches and a whopping 39 million customers across the globe. About 25% of its business comes from its overseas operations.
Outlining the bank’s plans in New Zealand, Mr Mallya said the bank had already started building its lending portfolio. About 52% of this comprised housing mortgages and the rest other forms of credit, he told Indian Weekender.
The rather small capital of US$40 million for a bank of its size was not a limiting factor, Mr Mallya said.
“The parent bank is always available to help increase this. But [BOBNZ] will also be taking deposits from local customers and this would help increase the lending portfolio.”
Bank of Baroda was deemed India’s best bank last year and Mr Mallya, the nation’s best banker. This was based on hard performance figures, Mr Mallya told Indian Weekender when asked how this was determined.
For instance, the bank’s non performing assets (bad loans) in its entire lending portfolio was 0.3% compared to the average of about 1.5% of India’s other public sector banks.
Despite the recession, the bank had considerably increased both its volume of business and its profit, Mr Mallya said.
“Because of the trouble that other western banks were in, Bank of Baroda was in a position to take advantage of the situation thanks to its sound balance sheet and robust banking practices and cherry pick clientele, which helped increase business,” he said.
He commended the Indian banking system’s strong adherence to prudent banking norms and said this was responsible for most Indian public sector banks’ strong performance through what was widely seen as a worldwide recessionary period.
“The Indian regulatory authority [the Reserve Bank of India] has very strict capital adequacy norms which all banks have to stick to. This prevents over leverage and helps maintain liquidity,” Mr Mallya said.
Bank of Baroda had set itself an even higher capital adequacy ratio that what was prescribed by the Reserve Bank o India, Mr Mallya added.
Bank of Baroda NZ Managing Director Satish Vermani said New Zealand’s 19th commercial bank which was given licence by the Reserve Bank of New Zealand in late 2009, had garnered about 1100 customers.
But the bank was mainly patronised by the Indian diaspora, with more than 95% of account holders being of Indian origin, one of the managers revealed.
When Indian Weekender asked why despite 60 years of global expansion the bank still had Indians as its customer focus, Mr Mallya said it was because of a combination of reasons. The bank tended to follow the Indian diaspora around the world setting up banks wherever Indian businesspeople settled.
This meant a preponderance of Indian clientele. “But over time this changes,” Mr Mallya said. “In Kenya and South Africa, Bank of Baroda is as much a local bank as their own banks and the clientele has large numbers of local people.”
This scenario was likely to be played out in New Zealand too, he said.
Mr Mallya and Mr Vermani both assured that the bank would develop products and practices that suited the New Zealand business environment. “It is important to develop a product the customer needs rather than try to see a product you already have, which may not be best suited,” Mr Mallya said.
The Indian entourage later met with the Indian community at the Mahatma Gandhi Centre at a function arranged by the New Zealand Central Indian Association and the Auckland Indian Association.
As well as minister Meena and Mr Mallya, National Party Member of Parliament Kanwaljit Singh Bakshi, AIA President Harshad Patel, NZICA President Paul Singh Bains and General Secretary Raj Thandi spoke at the function, with the minister outlining India’s economic progress and his government’s future plans.
He said this was an important time in the relationship between the two countries as they stood on the threshold of a free trade agreement.
Mr Mallya said that the minister was keenly interested in developing the banking sector and helped catalyse changes to improve services. He also said the bank was excited at the prospect of increased trade between the two countries because of the impending FTA. Trade had already increased 25% in the past two years, he said.
The bank hosted a dinner for about 250 guests drawn from a section of the Indian community. Reserve Bank of New Zealand Deputy Governor Grant Spencer, Bank of Baroda NZ directors Rajen Prasad and Vijaya Vaidyanath, minister Meena, Mr Mallya, Mr Thatte and Mr Vermani spoke on the occasion.