Bank of Baroda has decided to exit by March-end its South Africa operations after 21 years amid a probe into alleged compliance lapses by the Indian state-owned bank there.
The development that comes some months after the South African Reserve Bank imposed a fine of 11 million rand (Rs5.45 crore) for lapses in compliance.
The bank notified the South African Reserve Bank on Monday about its plan to exit the country.
The bank in a regulatory filing said that it is exiting operations in South Africa as part of its strategic plan for rationalisation of overseas branches.
The business of the bank in South Africa is not very significant and the exit will not have any major impact on its financials, the bank said in a regulatory filing.
"In line with the bank's strategic plan for rationalisation of overseas branches, the bank is exiting from its operations in South Africa," the filing said.
The bank further said that it will ensure an orderly exit in consultation with the local regulators.
A statement issued by the South African Reserve Bank said, "The registrar, which is part of the South African Reserve Bank (SARB), is in discussions with the Bank of Baroda to ensure its orderly withdrawal from South Africa so that no depositor is disadvantaged."
In a public notice regarding closure of South Afican operations, the bank said, "The branch will stop taking new / incremental deposits and disbursing loans with effect from March 1, 2018. Further, it will cease to operate and conduct the business of a bank with effect from March 31, 2018."
The bank had initiated operations in South Africa about 21 years ago.
Its exit from South Africa could also be linked to the Bank of Baroda being a banker to the Gupta family of Indian origin who reportedly took undue advantage of its connections with South Africa's president Jacob Zuma. South African authorities have alleged that the bank transferred a large sum of money to the Zuma family, which is now under investigation.
In a statement last week the bank had said the South African Reserve Bank is investigating allegations regarding compliance lapses at the bank's branch there and it was cooperating in the matter.
The bank was responding to clarifications sought by exchanges regarding a news report citing the bank's involvement with a particular Indian origin family in South Africa involved in a political scandal there.
The news report referred to the bank's dealings with the Gupta family and follows information furnished by the bank to exchanges in August 2017 about paying Rs5.45 crore as penalty.
It had also informed about paying Rs42.26 lakh fine in Seychelles without giving details.
"As regards the news item, the Reserve Bank of South Africa is investigating the allegations against Bank of Baroda and the bank is actively cooperating and supporting these investigations," the bank said in a regulatory filing to the exchanges.
Of the total 5,558 branches, the Baroda, Gujarat headquartered bank has 107 overseas branches.
The bank had reported a decline of 56 per cent in its net profit at Rs112 crore for the third quarter ended December. The bank had posted a net profit of Rs253 crore in the corresponding October-December period of 2016-17.