Reviving its overseas expansion plans, State Bank of India (SBI), the country?s largest bank, is getting ready to acquire a second bank in Indonesia and set up a subsidiary in Australia. The bank already has a branch operating in Australia.
The bank, which had acquired a bank in Indonesia in 2006, has already shortlisted two or three banks out of which one bank will be taken over by SBI through its existing branch? PT Bank SBI Indonesia at a cost of $100 million.
Confirming the proposed acquisition in Indonesia, Pratip Chaudhuri, deputy managing director, SBI, said, ?We have shortlisted the names of two or three banks and will zero in on??? one of them soon. The bank has a budget of over $100 million for buying a bank in Indonesia.??
SBI is also planning a second acquisition in Indonesia as the local law doesn?t?permit setting up new branches in the country. Besides, the bank is planning to open? branches in the Netherlands or Italy and also in Botswana.
Indonesia, as a part of the Asean region, is a growing economy and Indian companies are stepping up their activities in this country. This provides SBI the right opport- unities for it to grow its business in the country.
?We would soon seek regulatory clearance from both the Reserve Bank of India and the Indonesian banking regulator,?? Chaudhuri said.
On setting up?a new subsidiary in Australia, Chaudhuri said the bank would like to take advantage of?a local law which allows the co-existence of both a branch and a subsidiary.
Also, according to a local law, foreign banks, through their branches, cannot accept deposits worth less than $2,50,000.
?By having a subsidiary in Australia, we can have multiple branches in the country and can mobilise deposits worth less than $2,50,000 to grow our business there. We plan to have five to six branches in the country,?? said Chaudhuri. SBI would not be keen on an acquisition in Australia as this will turn out to be expensive.
?When the local law is permitting the bank to set up a subsidiary which can have many branches, it would be cheaper for us to expand our operations through this route. To take over an existing bank, we have to pay a huge premium,?? Choudhuri said. The bank will soon commission a study on the proposed subsidiary in Australia.
Bilateral trade between? India and Australia is on the rise and there is a growing Indian? student community in the country, which SBI would like to tap by expanding into different regions of the country.
Currently, the bank?s exposure in Australia, through its sole branch, is around?$500 million. The bank is also planning to expand its European presence by?venturing into Italy or Netherlands.
?These countries allow us to open local branch and as India?s trade is growing, we would be keen to have our presence in these countries,?? added Choudhuri. Currently, SBI?s?international business contributes 16% to the bank?s total business, compared with 12% a year ago. With new expansion plans, the bank wants its overseas operations to contribute 25% to bank?s total business.
SBI is currently present in 53 countries through its 100 overseas offices.