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EXCLUSIVE: Inside Bank of India Quitting The Ugandan Market Negotiations

Bank of India Uganda Limited is on the verge of quitting the Ugandan market, Business Focus has reliably established.

An insider at the bank told this site on Tuesday, Feb.20 that the entire banking sector in India is undergoing restructuring. Consequently, Bank of India, a state-owned bank is consolidating its offices, a move that will see the bank close some foreign operations and subsidiaries.

Uganda is one of the subsidiaries that have been earmarked for closure.

“The final decision [to close Uganda subsidiary] will be taken at the end of March at a board meeting to be held in India,” the source privy to the ongoing deliberations said, adding that Bank of India Uganda isn’t undercapitalized as reported by some sections of the media.

The source added: “Even if the decision is taken [to quit Uganda], it will take long before exiting the Ugandan market. A process to get a prospective buyer and evaluation will be embarked on.”

The source added that the process can take up to a year.

“Right now the bank is operating normally. We are meeting all Bank of Uganda requirements. Our capital is over Shs35bn yet the minimum capital requirement by the Central Bank is Shs25bn,” the source said, adding that if the bank quits the Ugandan market, it will not be based on its performance.

The bank has over 3,000 customers.

“Our customers have confidence in us. Not even 10 of our customers withdrew their money after news suggesting that we are undercapitalized. We are well liquidated and have capacity to pay our depositors,” the source said.

Bank of Baroda In the Picture

The source said if the Bank of India decides to quit, it will be sold to “a bank with similar operations like Bank of Baroda.”

Bank of India Uganda is one of the newest entrants in the Ugandan market. The bank re-entered the Ugandan market in 2012, having first opened shop here in 1953, but following the expulsion of Asians from the country by former President Idi Amin in 1972, the bank sold its assets to Bank of Baroda and exited the country.

Bank of India Uganda hit the ground running. It was the 15th most profitable bank in Uganda in 2016. It made a net profit of Shs2.3bn, up from Shs1.2bn in 2015. Its total assets also increased by 33.9% to Shs156bn in 2016, up from Shs116.5bn in 2015. The bank’s customer deposits grew by 65% to Shs99.1bn in 2016, up from Shs59.8bn. Loans advanced to customers also grew to Shs71.9bn, up from Shs50.8bn in 2015.

The bank is said to have made Shs4bn in net profit in the year ended December 2017.

 

Why Quit Uganda

It is worth noting that India based media-the Economic Times mid this month reported that Bank of India, the country’s fourth largest public sector bank will shut three subsidiaries in New Zealand, Botswana and Uganda as it seeks to conserve capital amidst a sharp rise in non-performing assets (NPAs) in the quarter ended December 2017 and struggles to shrug off restrictions placed on it under the prompt corrective action initiated by the Reserve Bank of India.

The closure of these subsidiaries will allow the bank to get back at least $50 million in capital which it can then use to shore up its domestic capital, said a person familiar with the development.
“Besides these subsidiaries, the bank also plans to close down representative offices in Beijing and Burma and also branches in Shenzhen (China) and Jersey (Channel Islands). In all three branches, three representative offices and three subsidiaries will be closed mostly in the next fiscal year,” the source said.

“These measures are a desperate attempt by the bank to conserve capital after losses widened in the quarter ended December 2017. Regulators in the subsidiary countries have already been sounded off and the process has been started. It is likely to be completed in the next fiscal year,” said another source familiar with this matter.

 

BoU Speaks Out

In a statement dated February 20, 2018 obtained by Business Focus, Prof. Emmanuel Tumusiime-Mutebile, the Governor BoU said Bank of India Uganda is ‘safe and sound’.

“Reports circulating on social media to the effect that there was a meeting between officials of Bank of Uganda and the Bank of India Uganda Limited, at which it was decided to close the Bank of India Uganda Limited, or that Bank of Uganda has taken over the said bank, are false,” Mutebile said.

He added: “Furthermore, there was no meeting between the Deputy Governor, Bank of Uganda and officials of Bank of India Uganda Ltd, as has been alleged.”

Mutebile said that Bank of India Uganda Ltd is operating normally, is profitable and fulfilling all regulatory requirements as set out in the Financial Institutions Act, 2004 as amended.

“There is no threat to the safety of the depositors’ funds,” he concluded.

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