India International Bank Malaysia Bhd, a joint venture led by Bank of Baroda, plans to open at least 10 branches in three years after becoming the first India-owned commercial lender in the Southeast Asian nation.

India International started operations today with its first outlet in Kuala Lumpur, two years after winning a license from Malaysia's central bank. The lender is 40 per cent-owned by Bank of Baroda, 35 per cent by Indian Overseas Bank, while Andhra Bank holds 25 per cent.

"Trade finance is one area where we'll focus in as trade between India and Malaysia is going very strongly," M.D. Mallya, India International's chairman, told reporters in Kuala Lumpur today. "Services like corporate lending, SME financing will be the focus."

Malaysia has been relaxing foreign bank ownership rules and granting more licenses as it seeks to triple the size of its financial sector by 2020, the central bank said in December. Bank of China Ltd, BNP Paribas SA and Sumitomo Mitsui Banking Corp. are among foreign lenders that have won permits.

Indian Overseas Bank is returning to the Southeast Asian nation after its previous license was withdrawn due to the lender's state ownership. A requirement prohibited any commercial bank under the effective control of a foreign government from holding a permit in Malaysia.

India International, which has US$100 million in capital, plans to expand total loans and deposits to RM2.5 billion (US$786 million) in three years, director M. Narendra said. The lender will initially have 32 staff in the country.

Malaysia's US$238 billion economy is projected by the central bank to expand as much as 5 per cent this year as Prime Minister Najib Razak accelerates spending on railways and highways ahead of a general election that must be called by early 2013. India was the country's sixth-largest export market in May, according to data compiled by Bloomberg. -- Bloomberg