The Hindu Business Line : SBI plans to restructure international operations

Looking ahead
Targets 25 per cent growth in advances in 2008-09.
Credit card business to be revamped.
2 firms shortlised for partnership in non-life business.

Our Bureau

Kolkata, May 2 Interest rates will remain flat or might even soften a bit in the short-term, Mr O.P. Bhatt, Chairman, State Bank of India, said here on Friday. The liquidity overhang and the slowdown in credit off-take would contribute towards a softer interest rate regime, he said.

Mr Bhatt, who was briefing newspersons on the bank’s results for 2007-08, said the issue of the merger of SBI with State Bank of Saurashtra was awaiting Government approval, which he hoped, would come shortly.

The merger of other associate banks, to be based on the experience of SBI-SBS merger, is expected to come through by March 2009. “We would first analyse how amicable our merger with State Bank of Saurashtra is in terms of employees, systems and procedures and based on the experience we would consider the sequence and pace of other mergers,” Mr Bhatt said.

SBI, according to him , is targeting growth in advances of 25 per cent in 2008-09. An estimated 90 per cent of the resources to be required for the projected growth in advances would come from deposit accretion while for the remaining 10 per cent other options would be examined, he said, refusing to give more details.

The international operations contributed to almost 10 per cent of the bank’s net profit in the financial year 2007-08. “We would like to raise it 25 per cent in the current fiscal,” he said making it clear that the sub-prime crisis had little effect on the bank’s overseas operations. The sub-prime exposure of SBI stands at $20 million and it has already made a mark-to-market provision of $10 million.

Rejig on the cards

The bank plans to restructure its international operations. “We are examining the performance of each geographical region and we would restructure our operation depending on which business is doing well in which region,” said Mr Bhatt. SBI has 84 branches in 32 countries at present.

SBI Cards, the subsidiary of SBI, will also be restructured soon. In the credit card business, the bank suffered a loss of about Rs 150 crore in 2007-08. The delay in the holding company structure would not have an immediate impact on the bank’s life insurance subsidiary, SBI Life. The bank has pumped capital into SBI Life and this will sustain its business for the next two years. However, if things do not seem to improve after two years, the company might have to be listed in order to be able to raise resources.

SBI, Mr Bhatt said, has shortlisted two firms for partnership in non-life business and the selection would be finalised shortly. The bank also plans to foray into custodial services and setting up of merchant establishments. “We have sought RBI approval for our custodial services business and once we receive it we will be going ahead,” he said.