Money & Banking

‘SBM Bank targeting asset size of ₹5,000-6,000 cr’

K Ram Kumar Mumbai | Updated on December 07, 2018

 

Enthused by the strong bilateral trade and investment ties between India and Mauritius, as well as the long-term growth opportunities offered by India, Mauritius-based SBM Holdings recently formed a wholly-owned banking subsidiary (WOS), SBM Bank (India) Ltd.

The four branches of SBM Bank (Mauritius), which has been in India since 1994, have migrated to SBM Bank (India) Ltd with effect from December 1.

SBM Holdings is the first foreign entity to set up a wholly-owned subsidiary for its operations in the country. Sidharth Rath, MD & CEO, SBM Bank (India), says his bank is a start-up bank. To begin with, the bank will focus on businesses such as lending to the MSME (micro, small and medium enterprise) and mid-market segments, trade finance, capital markets, wealth management and remittances.

In an interview with BusinessLine, Rath, a former Axis Bank veteran, underscored that his bank will look at products and businesses, which are capital-efficient, thereby enabling it to churn capital. Excerpts:

Why did SBM Holdings convert its India banking operations into a wholly-owned subsidiary?

As a branch, we had certain restrictions on functioning. The decision-making was driven by the parent. So, the TAT (turnaround time) was delayed. There were restrictions in terms of expanding the branch network. So, the WOS mode is to position SBM as an Indian bank.

On a standalone basis, we will have independence and decision-making will be quick. We can now adapt best to Indian conditions and move ahead. We have a long-term view on India.

So, the WOS mode is best suited in view of the long-term opportunities that we are seeing here.

Given that you started operations as a WOS with four branches and ₹2,000-crore business as on December 1, how do you intend to take the operations forward?

Our bank is a start-up. But we have an aspiration and ambition to build one of the finest financial institutions in the country. That is the basic intent. I am sure we will do it. So, it is an opportunity first of all to get a banking licence and then work on that. We are a universal bank.

Initially, we will be focussing predominantly on wholesale banking on the assets side, and a retail liability franchise.

Our objective is to see that the asset follows the liability profile and footprint.

We don’t want to ramp up assets and thereafter go searching for liabilities and carry (asset-liability) mismatches. These are the broad thoughts with which we started.

What are your branch and business expansion plans?

In terms of physical presence, over the next two years, we are looking at increasing our network from the current four branches to 16.

Of the 16 branches, four will be in unbanked areas and 12 in metros. As a start-up, we have to first learn to stand up and take baby steps. So, we are in that phase now.

The building blocks, the enablers, and the structures, should be in place in the next couple of months. We will gradually accelerate business. We are targeting an asset size of ₹5,000-6,000 crore in the next couple of years.

How many bankers are you planning to hire?

Today, we need good bankers. But we are not looking at high-flying bankers.

We will hire around 550 people. With more of automation/ digitisation, the overall requirement of manpower is something that has to be looked at. Being a small bank, we have to look at a modular approach in terms of technology and digital offerings, which are of the plug-and-play kind and are not capital-intensive.

We are looking at an open (technology) model where we can, after a particular duration, either upgrade or have the option to replace if something better comes in. The digital offerings have to be functional, interactive, and convenient to use.

Will the ₹500 crore capital be sufficient for your business plans?

The minimum capital requirement for starting the WOS is ₹500 crore. We have to squeeze this till the last drop in terms of returns over the next couple of years. Plus, we can raise Tier-II capital, which is 50 per cent of Tier-I cap.

Published on December 07, 2018

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