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State Bank of India plans to open an Australian subsidiary within a year to meet the large retail market from Indians migrating to that country, the lead bank's Chairman, Mr Pratip Chaudhuri, said here on Wednesday.
“The cost of setting up a subsidiary there is around $75 million, which we think is affordable,” Mr Chaudhuri said on his first visit to the city as the bank chairman.
Apart from the two retail initiatives in Singapore and London, “We are actively exploring the option of a subsidiary in Australia,” Mr Chaudhuri said on the sidelines of a bus donation event of SBI's Bangalore branch.
Australia, along with Africa, is an important destination suited for SBI's expansion. The present Sydney branch cannot handle smaller value retail deposits.
The bank may opt for an MTN (medium term note) in the second quarter of this year. “We now have a $5-billion programme which has been upped to $10 billion.”
When we go and borrow, there should be visibility of assets. First we get the loans, assets then we hit the markets,” he said.
SBI expects a rupee credit growth of 16-19 per cent, however, “we are seeing a very robust demand for growth in the foreign currency market,” Mr Chaudhuri said.
Rupee loans
He feared the demand for rupee loans may slacken with the interest rates rising and GDP growth rate slowing down. “Where I am worried is the interest rate going up. People may not use the rupee for long-term borrowings. They may go for ECB (external commercial borrowing) and, with that, the demand for rupee loans may not be high. Some people who cannot borrow in the ECB market may hold back expansion plans.
Capital goods manufacturers, for instance, may go slow.
Earlier, at another event at a group bank, the State Bank of Mysore, Mr Chaudhuri said the bank had sought Government approval for the proposed rights issue, which could happen by this year-end. It could be an issue for Rs 20,000 crore, of which, the Government's share would be Rs 12,000 crore and in cash.
Discussions are on and the Government is very supportive of its flagship bank, he added.
On the recent comments of RBI Deputy Governor, Dr K. C.Chakrabarty, on banks having very high net interest margins, Mr Chaudhuri said, “He has said what he has felt. He has more data at his disposal.
“He has seen more banks and more banking systems. If you see the pattern in that, there must be some truth in his [comments.]”
While NIMs should be reduced, he said there are no easy ways of doing it.
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