Bank of India seeks go-ahead to buy Kenyan firm

Some of Indian corporate jewels with offices in Kenya include third mobile operator Essar Kenya, truck firm Tata, oil dealers Reliance and telecommunications firm Zain Kenya, which is majority owned by India’s Bharti Airtel.

The bank is also eyeing transaction income from the growing import business given that India is the second largest importer of goods and services after United Arab Emirate with imports worth Sh83.2 billion.

Talk of tie ups in the banking scene has hit fever pitch after the Government asked banks to increase their minimum core capital to Sh1 billion by 2012 from the current Sh500 million.

The increase in capital was informed by the need to position smaller banks to compete and break the dominance of the top five players who among them control 75 per cent of the market that has 44 players.

For Bank of India, an acquisition would provide an easy solution from growing from within itself, which could involve buying land, putting up buildings, hiring local staff, struggling to lure deposits and fighting for market share against established rivals like Barclays Bank, KCB and Standard Chartered Bank.

It has 3, 200 branches in India and operations in US, Europe and Asia

If the acquisition comes to pass, this would be its second overseas acquisition.

In 2008, the bank acquired a 76 per cent stake in PT Bank Swadesi Tbk, Indonesia.

Bank of India has a presence in other African countries including South Africa, Tanzania and Zambia. In Kenya, the bank is not only keen to grow it’s lending, but also transaction income in the form of cash transfers, issuing letters of credit and guarantee of letters of credit.

In 2009, the bank lent Sh5.4 billion out of the Sh13 billion it holds in customer deposits, with the rest of the cash being placed in government paper.

It returned a profit of Sh609 million in 2009 compared to Sh570 million a year earlier.