Three major Indian banks, Bank of Baroda, Indian Overseas Bank and Andhra Bank have entered into a joint venture to open a brand new commercial bank in Malaysia, looking to expand customer bases and capitalize on the growing regional economic opportunities.
With deals yet to be worked out, news agencies have confirmed that Bank of Baroda will hold a major stake in the new joint venture, hoping to expand to 40 million customers. The first branch is expected to open by the end of 2011 if all goes according to plan.
The banking sector has been seeing significant changes in recent years, most especially in Western markets such as the United States and the European Union, where both debt and mortgage crises have left many banks crippled or no longer under the same ownership. Emerging markets and developing nations, on the other hand, have seen a comparatively healthy period of growth during the same period, or at least, less of a recessive decline than many established economies. That Indian banks can expand is a major indicator of continued economic opportunity in the region, as a major emerging middle class will represent a growth opportunity for investors in the coming decades.
Southeast Asian countries have been seeing promising, though not always perfectly stable, growth, and are likely to continue seeing their economies evolve in a healthy direction for the foreseeable future, barring any unexpected catastrophes. Western markets, by comparison, have more sobering hopes for the near future, with many major banks reducing workforces and enacting other cost-cutting measures to stay profitable or even viable for future profitability.
It is unlikely that European or American banks and other investment opportunities are likely to be supplanted by emerging markets, but it nevertheless is a reminder that market opportunities to be found in major emerging markets such as India, Brazil, perhaps Russia, Southeast Asia and others have become increasingly relevant, and this is unlikely to reverse in the near future, while major markets are on at least a temporary decline. The balance of power is likely to shift slightly, and the world economy will be, fortunately, supported by multiple pillars rather than one of preeminent significance.
On the other hand, other Indian banks have been increasing interest rates to reduce or cover costs, such as YES Bank and State Bank of India; the sector is certainly not perfect, to be sure, and the world economy is likely to see a period of relaxed growth in the near future. And, of course, emerging markets are always less stable than established ones. But of course, they certainly have farther to go than established economies, and for the most part can offer better investment opportunities for market-savvy organizations willing to find them.
With the first branch of the new joint venture scheduled to be opened quite soon in Kuala Lumpur, Bank of Baroda and others have indicated their intention to capitalize on such opportunities quickly, and if the Southeast Asian growth rates are in any way indicative of future opportunities, it is likely this will be a rather successful move for those organizations.
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