Bank of India seeks go-ahead to buy Kenyan firm

Bank of India has made applications to regulators to be allowed to incorporate as an independent Kenyan bank to pave way for a buyout of a local rival as it races to increase its footprint in the region.

The deal will also enable it tap into the growing number of Indian companies with investments in the country.

The Kenyan unit of Bank of India has four branches in Nairobi, which runs as a branch of the Mumbai-based bank rather than as subsidiary.

The bank keen on a country-wide presence has opened talks with an unnamed bank for a potential tie-up, opting for acquisitions rather than organic growth in its quest to hit the target.

But its incorporation in India is posing regulatory challenges in its pursuit of buyout deals.

The bank has applied to the Central Bank of India and is set to put another application to Central Bank of Kenya (CBK) to be allowed to run as a fully fledged Kenyan bank and subsidiary of its parent company based in India.

This is aimed at reducing regulatory requirements and reducing its tax obligations by avoiding double taxation (in India and Kenya), lawyers say, arguing that a branch cannot acquire another branch.

At present, the bank will have to seek regulatory approvals in India and Kenya and finance the transaction from the balance sheet of its parent company.

“We are looking at expanding to Nakuru, Kisumu and Mombasa, mainly through the inorganic route,” added Mr Sekhar.

New opportunities

The bank’s expansion drive is informed by the growing number of business run by the ethnic Indian community in manufacturing and trade and Kenya’s high interest margin.

The margin between cost of deposits and yield on advances stands at between three and four per cent in India, about a third of the 10 per cent to 11 per cent range that obtains in Kenya.

“The increase in Indian investments has thrown up new opportunities for banks, which we would like to tap by expanding our presence in the region, mainly through the acquisitions,” a senior executive of the bank told India’s press in Mumbai in May.

The bank declined to name the banks it is targeting, but said the marked bank have the same profile as Bank of India, a clear sign that its keen to buy out a bank with a heavy presence of Indian companies.