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Thursday, Sep 30, 2004

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PSBs shaping up for bigger global push

Rukmani Vishwanath

`The new WTO regime from 2005 will throw open a lot of opportunities for banks to finance importers-exporters and other corporates for trade. We foresee a lot of trade relationships being formed with India.'

Mumbai , Sept. 29

WITH the WTO norms coming into force next year, a number of state-owned banks in the country are aggressively positioning themselves to capture a larger segment of the international business.

Banks, which are hopeful that the new norms promoting free trade will enhance the scope of their business, have scaled up their targets for international operations.

The top state-owned banks in the country expect their global operations to contribute at least 20 per cent of the overall profits from the next financial year onwards, from the current levels of 5-10 per cent.

"The new WTO regime from 2005 will throw open a lot of opportunities for banks to finance importers-exporters and other corporates for trade. There is a lot of scope to do business both ways. ASEAN (Association of South-East Asian Nation) will play a crucial role and we foresee a lot of trade relationships being formed with India," said a banker.

In the run up to 2005, banks are preparing themselves not only by way of branch expansions, but also by raising funds to meet global credit needs.

"A lot of rollovers are taking place in international credit. Banks are raising funds to meet global credit needs, external commercial borrowing requirements of corporates and also expand their overseas balance-sheets," said a senior official with a leading public sector bank, commenting on recent raising of funds by many banks for lending to their international operations.

Recently, SBI raised $250 million through a foreign currency loan to expand its global business and plans to mop up another $250-$500 million through a bond issue in the international markets, in the next couple of months.

Baroda (BOB) recently raised around $150 million to fund its international operations. The bank currently had 38 overseas branches and 17 subsidiaries. By the end of this financial year, the bank plans to expand its reach to Tanzania, Thailand, Singapore, Bangladesh, Australia, Canada, New Zealand and Houston in the US.

Similarly, Bank of India shortly plans to raise around $250 million to fund its international operations. In fact, last year the bank had raised around $300 million for the same purpose. BOI has plans to set up subsidiaries in Shenzen, China and San Francisco, US, shortly. The bank also understood to be exploring options in Africa, Bangladesh and the Middle East.

Branch expansions and capital raising aside, banks are also tweaking their operational efficiencies in their foreign offices.

Recently, SBI decided to step up its technology platform in order to streamline its global operations and tied up with Infosys Technologies, for its core-banking solution, `Finacle.'

The core-banking platform is expected to provide the bank a unified view of its international business, with better risk management capability, enhanced MIS and a uniform customer experience.

The bank has opted for this technology solution at a time when it plans to open 16 new overseas branches in the current fiscal, taking the total overseas presence of the bank to 36 countries, with a total of 70 offices by March 2005.

Mr A.K. Purwar, Chairman, SBI, recently also talked of the bank's intention of acquiring small stakes, in Asian and African banks.

According to banking analysts, public sector banks have an edge over private banks due to their international reach. Although the competition has been fierce over the past couple of years in the domestic retail markets, state-owned banks can now get a boost by pushing their international operations into full throttle next year.

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