Braving a bleak outlook for the financial industry globally, India’s banks are proceeding with plans to expand their overseas networks, seeking to tap the estimated three crore people of Indian origin living abroad. State Bank of India (SBI), the country’s largest lender, is leading the effort.
SBI is in the process of setting up branches in Canada, Saudi Arabia, Dubai, China, Hong Kong, the Maldives and Nepal, and studying the possibility of opening at least one more outlet in the US, said an SBI executive who didn’t want to be named, citing company policy.
The US Federal Reserve Board has licensed SBI to open a branch in Jackson Heights in New York City, which has a high concentration of South Asians. The bank already runs nine branches in the US, home to 23 lakh people of Indian origin as of 2005.
India’s banks have in recent years expanded their overseas networks in an attempt to win customers from among non-resident Indians. Many applied for branch licences long before the onset of the global financial crisis.
“Opportunties in the overseas market still exist, though it may be more restricted than was thought six months ago,” said Seshadri Sen, associate director of research (financials and strategy), at Macquarie Capital Securities India Pvt Ltd. “The central thesis of most of the overseas expansion was to meet expatriate Indians’ financial needs — and that market still remains.”
The Indian diaspora generates about $400 billion in economic output and an annual income that is roughly about 30 per cent of India’s gross domestic product.
SBI, which in March became the first Indian bank to get a qualifying full bank status from the Monetary Authority of Singapore, has three branches in the city-state where it plans to open two more by the end of fiscal 2009. Full bank status allows SBI to open up to 25 branches and automated teller machines in Singapore.
“The business outside India is growing faster than that inside,” SBI chairman OP Bhatt told The Banker magazine recently.
“At present our business outside India is about 10 per cent (of total business) and in about five years we hope to double it to 20 per cent.”
State Bank isn’t alone in venturing overseas. Bank of Baroda (BoB) is opening a branch in Houston in the US and upgrading its Sydney representative office to a full branch. It is also looking to open branches in Yemen, Qatar and Kuwait in West Asia, said executive director RK Bakshi.
Bank of India (BoI) plans to set up a subsidiary in Canada in about 7 months and is looking to open branches in South Africa and Madagascar, said JS Chiney, general manager, international banking and treasury.
Both BoB and BoI are also in the process of opening subsidiary banks in New Zealand.
Canara Bank opened a branch in Shanghai two months ago and has five more licences to open outlets overseas.
Among Indian banks, SBI has the largest overseas network. At the end of fiscal 2008, it had 84 offices spread over 32 countries, covering all time zones. BoB had 71 branches spread across 25 countries and BoI 26 in 14 countries.