ABN Amro Bank is likely to be the first off the block to take advantage of the government's decision to allow foreign banks to operate through subsidiaries in India.

ABN Amro global CEO Rijkman Groenink has told a publication in Hong Kong that the bank is planning "to incorporate" its business in India. The bank is now operating as a branch of the Netherlands-based bank. Romesh Sobti, India chief of ABN Amro, refused to comment on the development.

The CEO has said the bank plans to hold a 74 per cent stake in the locally incorporated subsidiary and sell the remaining 26 per cent of the equity to a local co-investor.

According to him, there are several takers for the 26 per cent stake. "They are lining up to take this stake: Indian capital is very interested to invest in the financial sector," he said.

The bank wants to sell its 26 per cent stake to one financial partner, and wants to eventually have full control of the subsidiary. The CEO said it was now 100 per cent controlled by the bank as a branch and it wanted one financial investor "who would ride with us with no guarantees".

But banking industry analysts said the government had allowed foreign banks operating in India to take a 100 per cent stake in a subsidiary and foreign banks might not be required to offload 26 per cent to take the subsidiary route. The Reserve Bank of India has, however, not yet issued the new guidelines on this.

ABN Amro's Indian businesses have been valued at between euro 500 million (Rs 2,685 crore) and euro 800 million (Rs 4,296 crore). In other words, selling the 26 per cent stake can fetch ABN Amro between euro 130 million and euro 208 million (Rs 698 crore and Rs 1,117 crore, at Tuesday's conversion price).

The bank, the fourth largest foreign bank in India, has an asset base of around Rs 10,000 crore (Rs 100 billion) spread over 15 branches. It posted a net profit of Rs 146.70 crore (Rs 1.47 billion) in 2003-2004.

"Business has grown despite only being able to open one or two new branches a year. The local competition are opening 50 or 60 branches a year. By doing this incorporation, we can move much faster and can open as many branches as we like," Groenink pointed out.

Incidentally, ABN Amro holds a 75 per cent stake in its equity brokerage, its primary dealership arm as well as in the asset management company operating in India.

Set up in 1920, and traditionally known as a strong "diamond financing bank," ABN Amro has turned into a bank that provides a comprehensive range of services. It took off in a big way in 1991, after the merger of ABN and AMRO worldwide. The bank acquired the retail business of Bank of America in late 1999.