|State Bank of India serves 500 million Indians and manages 194 offices overseas|
State Bank of India is its country in microcosm. Every challenge and diversity of India – its impoverished millions, its tech-savvy educated middle class, its hundreds of recognized languages – is reflected and served by an institution whose mandate requires their inclusion. It is a banker to 500 million people in India.
What is less well known is that it also maintains 194 overseas offices in 36 different countries. And, even as it digests a merger with five state bank subsidiaries and a bank directed at women, Bharatiya Mahila Bank, it is prioritizing further global expansion.
“We are the largest bank in India and most, if not all, of the corporate groups bank with us,” says B Sriram, managing director of the corporate banking group at SBI. “We have followed the Indian trade as it diversifies into the global economy.
“The other part is that we are, as the slogan goes, ‘a banker to every Indian’. And a large number of them are in the Indian diaspora settled across the globe.”
Now, however, SBI wants to do more than simply follow its people and companies overseas. “We are trying to reposition ourselves,” Sriram says. “Not only are we supporting Indian corporates and trade across jurisdictions and geographies, we are trying to diversify our portfolio in most of those countries by looking after the local business.”
That seems a big ask, putting it in competition with the likes of HSBC and Citi. But Sriram argues the bank has been there so long and its clients have localized themselves so intensively that it is achievable.
“We are today recognized much more as a local bank than an Indian bank,” he says. “We have the benefit of 30, 40, 50 years of experience in running banks in these countries. We want to leverage our position to do more local business as well.”
Sriram says the bank’s international portfolio today is worth about $40 billion, the biggest components of which are trade finance and loan credit, worth $16 billion to $17 billion apiece. In the loan business, 60% now goes to local rather than India-based businesses. “So the mix has changed,” he says.
The overall ambition is to push international banking from 15% of the total book, where it is today, to 20% over the next three years.
Doing so requires bringing all international businesses up to a common standard. “Instead of saying that you’ll get 10% return on equity across the board internationally, where some deliver 18% and others get 5% or 6%, we are trying to make sure that each one lives up to its potential,” he says.
Additionally the bank hopes to use its correspondent banking relationships – “something we have nurtured over the years” – as a source of leverage into local markets.
Internationally the bank operates out of regional hubs in Hong Kong, Dubai, Frankfurt, the UK and US, and has what it calls ‘neighbourhood’ operations, meaning Nepal, Bangladesh, Sri Lanka and others in the immediate area around India.
But growth is coming in newer areas. Sriram highlights Australia: “A recent addition to our portfolio. We are starting to understand the market more, and I am sure in the next three to five years you will find Australia will add a significant portion to us.”
It has opened new branches in Seoul to serve India-Korea trade, and in Myanmar, as well as re-opening one in Brazil. For the moment, however, most business comes out of the UK, the Middle East and the countries served from Hong Kong.
SBI is run on commercial terms by a largely independent board, but is nevertheless state backed and perceived as an instrument of India Inc. Is that good or bad when growing internationally?
“There are more advantages than I can think of disadvantages,” says Sriram. Being synonymous with India is very handy for governmental relationships, for example, and at a more micro level makes it a first port of call for remittance business from overseas Indians.
It is a surprise to many, but SBI is a tech-savvy institution in a country that is rapidly embracing digital banking. Sriram believes technology will be a differentiator internationally, not a disadvantage, with trade finance particularly ripe for change.
“We would like to leverage technology to help us deliver trade transactions more effectively,” he says, with an emphasis on removing physical intermediation wherever possible. “The trade finance back-office software is in place across the 36 offices, and we are trying to push the front office now.”
As for the domestic merger, chairman Arundhati Bhattacharya says it is going well, although it will take 12 months before the benefits will start to be reflected in the bank’s numbers. “We are gaining some very high-quality people,” she says.