SHANGHAI: Canara Bank, one of India's top three banks, will be upgrading its representative office in Shanghai to a branch bank within two years.
The bank announced that it is also looking at possibly holding shares of Chinese banks.
Its representative office opened on Monday in Shanghai, China's commercial hub, with the aim of playing a key role in furthering bilateral trade.
Canara Bank, based in Bangalore, is important in handling India's foreign trade business, with a commanding share of 8.66 per cent of India's exports and 4.27 per cent in imports.
India-China bilateral trade in 2004 amounted to US$13.6 billion. In the first five months of 2005, bilateral trade touched US$7.7 billion.
By opening the representative office, Canara Bank has put its foot on Chinese soil, Chairman and Managing Director of the bank M B N Rao said.
"We would like to play a key role in furthering India-China bilateral trade. And setting up a representative office in China is the first step in this direction," Rao said.
Chinese authorities encourage reputable foreign banks to hold shares in local banks.
Rao also expected the possible China-India FTA deal would facilitate financial business between the two countries.
Ashok Kumar Gupta, the bank's chief representative in Shanghai, said the bank intends to upgrade the office to a branch bank.
But due to some Chinese official requirements, the process could take up to two years to complete, he said.
Reports said four foreign investors would spend US$6 billion for nearly a quarter of the Bank of China (BOC), including the Royal Bank of Scotland, the Singaporean investment agency Temasek Holdings, the UBS and the Asian Development Bank.
Chinese banks are making efforts to replenish their capital base as the majority of Chinese banks fall short of the 8 per cent requirement for capital adequacy ratio.
Canara Bank's capital adequacy ratio stood at 12.78 per cent while its non-performing loans were at a low 1.88 per cent.
The bank is a listed company and 73.7 per cent of the shares are owned by the Indian Government.
With a network of 2,512 branches, the global business of the bank reached US$35.97 billion in March.
Its representative office will liaise with Chinese banks that have dealings with India, and will offer banking services through Canara Bank's large network of branches in India.
The chief representative of Canara Bank will regularly meet various Indian companies operating in China, and will assist Indian clients visiting China for trade purposes and business, Rao said.