SBI’s Chicago unit gets a rap in US body report

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New York, Mumbai: A US government body created to restore confidence of the public in the country’s banking system feels that Indian lender State Bank of India’s Chicago unit has to improve to meet the local credit needs. The Federal Deposit Insurance Corporation (FDIC) has concluded that SBI’s Chicago branch needs to improve its compliance with the Community Reinvestment Act.

The Act is aimed at encouraging insured banks and thrifts to meet local credit needs, including those of low and moderate income neighbourhoods. Moreover, the activities should be consistent with safe and sound operations.

An SBI official told Fe on the condition of anonymity that they have not received any communication from the FDIC on this. However, he claimed SBI’s Chicago operations were doing well.

In the list of banks evaluated for compliance, the FDIC has given the rating “Needs to Improve” to SBI Chicago, in April 2009, according to the latest data available with the agency. Out of the 18 banks rated in the Chicago region, the FDIC concluded that only SBI needs to improve its activities in terms of catering to local credit needs, while 15 of them were evaluated as “satisfactory” and two were said to be “outstanding”.

Since 1990, the government has made it mandatory for the FDIC to publicly disclose the evaluation and rating for each bank or thrift that undergoes a CRA examination.

The FDIC was established in 1933 to restore public confidence in the nation’s banking system. The Chicago and New York branches are members of the FDIC. SBI has nine branches in the US. This development comes at time when SBI is planning to strengthen its presence in countries including the US and the UK which have strong India links. “Initiatives (are) under way to strengthen business in countries with a strong India linkage like the USA, UK and UAE,” a senior SBI official had said, adding, SBI plans to become a major player for non-resident Indians (NRIs). “The restructuring of the international business is under way to enable new business model,” he had added.