IndusInd Bank to set up subsidiary for parabanking, wealth services

IndusInd Bank plans to set up a subsidiary for parabanking activities by March 2008. The bank''s managing director and chief executive officer Bhaskar Ghose said a subsidiary was necessary, as the bank could not undertake these activities. He was speaking to the media after the bank''s annual general meeting in Pune on Thursday 20 September.

IndusInd will also be looking at wealth management. Ghose said it had already applied to the Reserve Bank of India (RBI) for permission to set up a subsidiary for wealth management services. This may require a capital of Rs50 lakh to Rs5 crore.

At present, the bank has a tie-up with financial services provider Religare. This intermediate arrangement will continue till the new subsidiary is formed.

IndusInd''s lines of businesses include corporate banking, retail banking, treasury and foreign exchange, investment banking, capital markets, non-resident Indian (NRI) / high net-worth individual (HNI) banking, and (through a subsidiary) information technology (IT).

Ghose said the bank is also planning to enter the life insurance business, most likely in partnership with a foreign insurance player. It already has a bancassurance tie-up with Aviva Life Insurance.

He said the bank is planning to float a subsidiary later this year to enter the insurance broking business, which will enable it to sell products of all insurance companies, with a token capital outlay of between Rs5 lakh and Rs10 lakh.

The bank hopes to fill the gap between its authorised capital (Rs400 crore) and paid-up capital (Rs320 crore) over the next two years. It is planning to raise tier II capital of Rs250 crore to Rs350 crore later this year, and tier I capital in the first half of the next fiscal year.

Ghose said the bank had successfully completed its maiden GDR issue towards the end of 2006-07, which had enhanced its net worth to over Rs1,000 crore. He pointed out that the bank''s balance sheet size was above Rs20,000 crore and said the board of directors had recommended a dividend of 6 per cent for the year ended 31 March 2007.