HISTORY OF INDIAN OVERSEAS BANK 1937 History & Overview

Indian Overseas Bank (IOB) was founded on 10th February 1937 by Shri M.Ct.M. Chidambaram Chettyar, a pioneer, with the main objective of specializing in foreign exchange solutions required by Indian traders in South East Asia. The circumstances could not have been more disheartening for anyone contemplating starting a bank, leave alone a specialised bank dealing in foreign exchange. Global banking was in the doldrums following the First World War. The Great Depression of 1929-33 had plunged the global economy into near bankruptcy. Even the mighty Imperial Bank of India, the predecessor of State Bank of India, had been statutorily prohibited from undertaking foreign exchange business as it was considered extremely risky. Yet, braving all these an 'indigenous banker' from South, barely 30 years of age, launched the country's first exchange bank in 1936. M.Ct.M Chidambaram Chettyar (M.Ct.), the founder of Indian Overseas Bank was truly a pioneer who dared to turn adversity to advantage. M.Ct. Bank M.Ct. owed his grounding in banking to his family owned bank, the M.Ct. Bank, which was founded in Mandalay by M.Ct's family in the hey days of the Chettiar community's thriving business in Burma. It specialised in hundi business, whereby money paid by Indian businessmen into the bank in overseas centres was paid out in India on submission of the hundi document for encashment. These family owned banks served as clearing houses for smaller banks. They also acted as the biggest investing institutions or receivers of deposits

from the smaller firms and other Indian financiers. The M.Ct. bank was active in many parts of East Asia for several decades. It was M.Ct. Bank's operations and the role it played in Indian business in Burma that, more than anything else, made M.Ct. realise that Indians doing business overseas needed an Indian owned exchange bank that would be more helpful to them than foreign owned banks. M.Ct's family was also closely associated with the Indian Bank right from its inception. M.Ct's father was a Director in the bank from 1914 till his death in 1930 when he was replaced by M.Ct., who remained in the Board till 1940 and again between 1945 and 1949. Those early years in the Board of the bank must have also stood him in good stead in building IOB.

Founding Directors M.Ct.M. Chidambaram Chettyar, Chairman, was a member of the Council of State at Delhi. He was also Chairman of United India Life Assurance Co. Ltd. and Director of Several other Indian Companies. K.V. Al. Rm. Alagappa Chettiar, Dy. Chairman, was a Barrister at Law and a leading banker and businessman in South India. H. Bhimasena Rau was a retired Accountant General of Government of India. Chunilal B. Mehta was well known Cotton and bullion merchant of Bombay. P.K.N.K.M. Nagappa Chettiar and P.V. Raman Chettiar were well known businessmen with investments in Malaya. Among the initial subscribers to the bank's capital were the brothers K. Srinivasan and K. Gopalan, properietors of The Hindu. The Bank opened a branch (Penang) in Malaysia

The Bank opened a branch (Penang) in Malaysia (then Malaya or Straits Settlements) in the first year of its opening. Next year the Kuala Lumpur branch was opened followed by Ipoh and Malacca branches. The Klang branch was added after Independence.

IOB commenced operations

IOB commenced operations on February 10, 1937 in Karaikudi and Madras (Chennai) and a few months later in Penang and Rangoon. In 1938 more branches followed around Chettinad apart from one in Kuala Lumpur. Within a decade, the bank established its presence in Singapore, Colombo, Ipoh, Malacca, Hong Kong and Bangkok. That it was the only 'foreign bank' permitted to operate in Bangkok was a measure of reputation that the bank had built up within its first few years of operation.

IOB branches in Penang and Singapore

IOB then quickly opened a branch in Penang and another in Singapore. The Bank served the Nattukottai Chettiars, who were in mercantile class that at the time had spread from Chettinad in Tamil Nadu state to Ceylon (Sri Lanka), Burma (Myanmar), Malaya, Singapore, Java, Sumatra, and Saigon.

As a result, from the beginning IOB specialized in foreign exchange and Overseas Banking.

IOB had the unique distinction of commencing business simultaneously at Karaikudi and Chennai and within nine months in Rangoon, Burma and Penang, Malaysia. IOB opened a branch Ceylon in 1946.

IOB opend a branch in Bangkok in 1947.

At the time of Independence IOB had 38 branches in India and 7 branches abroad. Deposits stood at Rs.6.64 Crores and Advances at Rs.3.23 Crores. As early as in 1957 the Bank felt the need for upskilling the Bank Staff and established a training center which has now grown into a full scale Staff College at Chennai with 9 training centres all over the country.

IOB was the first Bank to venture into consumer credit. It also introduced the popular Personal Loan Scheme during this period. In 1964, the Bank made a beginning in computerization in the areas of Inter Branch Reconciliation and Provident Fund Accounts.

In 1968, IOB established a full fledged department to cater exclusively to the needs of the

Agriculture sector. IOB was one of the 14 major banks that were nationalized in 1969.

On the eve of Nationalisation, IOB had 195 branches in India with aggregate Deposits of Rs.67.70 Crs and Advances of Rs.44.90 Crs.

In 1973, IOB had to wind up its five Malaysian branches as the Banking law in Malaysia prohibited operation of foreign Government owned Banks. This led to the creation of United Asian Bank Berhad in which IOB had 16.67% of the paid up capital. In the same year Bharat Overseas Bank Ltd., was created in India with 30% equity participation from IOB to take over IOB's branch at Bangkok in Thailand.

In 1977, IOB opened its branch in Seoul and a Foreign Currency Banking Unit in the free trade zone in Colombo in 1979. The Bank has sponsored 3 Regional Rural Banks, viz., Puri Gramya Bank, Pandyan Grama Bank & Dhenkanal Gramya Bank. Puri Gramya Bank and Dhenkanal Gramya Bank are amalgamated as Neelachal Gramya Bank. The Bank also set up a separate Computer Policy and Planning Department (CPPD) which has since become Information Technology Department, to implement computerization, develop software packages on its own and to impart training to the bank's staff.

IOB got autonomous status during 1997-98. IOB had the distinction of being the first Bank in Banking Industry to obtain ISO 9001 Certification for its Computer Policy and Planning Department from Det Norske Veritas (DNV), Netherlands in September 1999. This Certification covers Design, Development, Implementation and Maintenance of software developed in-house, procurement and supply of hardware and execution of turnkey projects. During 1999, IOB started tapping the potential of internet by enabling ABB card holders in Delhi to pay their telephone bills by just logging onto MTNL web site and by authorizing the Bank to debit towards the telephone bills.

The Bank made a successful debut in raising capital from the Public during the financial year 2000-01, despite a subdued capital market. The issue opened on September 25, 2000 for raising Rs.111.20 Crores and was oversubscribed by 1.87 times.

The Bank approached the public for the second time in September 2003 to raise share capital with a premium of Rs.14 per share aggregating to Rs. 240 Crores. The issue was successful

with over subscription of 6.14 times. Consequent to the Public Issue, the share of the Government in Bank's capital came down to 61.25% .