The third largest private sector lender of the country, Axis Bank is gearing up to extend its offshore business domain.

With present status of having branches in Hong Kong, Singapore and Dubai and representative offices in Abu Dhabi and Shanghai, the bank plans to set up branches in Sri Lanka and a subsidiary in London.

"We are looking to convert our representative office in Shanghai into a full-fledged branch. Besides, we will also be opening a branch in Sri Lanka and a subsidiary in London", Shikha Sharma, managing director and chief executive officer, Axis Bank said.

Speaking about increase in interest rates, she said that with continuing pressure of rising inflation, rise in policy rates is on the cards from RBI.

The growth in net interest income (NII) has been almost flat for the bank in Q4 of the last fiscal while there has been a decline in net interest margin (NIM).

"Our NIM declined by 36 basis points in the January-March quarter of the previous fiscal. There has been a sudden tightening of liquidity and some of the margin gains had to be given up. The bank's NIM had posted a growth of 20 basis points in the October-December quarter of 2010-11 and on a long-term basis, we are eyeing a NIM of 3-3.5 per cent. The rising cost of funds is not a cause of concern and we should watch NIM on a year-on-year basis", she said.

Speaking about merger of Enam Securities' investment banking arm, she said, "The acquisition of Enam Financial is meant for plugging our capability gap. Axis Bank already has an in-principle approval of the Reserve Bank of India (RBI) for the acquisition but the process needs a series of other approvals. Axis Bank has an asset management company and now we will have an investment bank. Both Enam and Axis Bank are strong brands and we would leverage both the brands to lend a distinct identity to the investment bank."