SBI might shut unviable branches abroad

To consolidate and strengthen foreign business, State Bank of India (SBI) is looking at shutting some unviable branches abroad and is preparing a three to five-year road map to spruce up international operations.

The country’s largest lender would soon finalise business targets for the current financial year (2016-17) and conduct a strategic review for a medium-term plan. B Sriram, managing director (corporate banking), said the lender had continuously reviewed its operations. “Over the years, many regulatory changes have come about and compliance costs have also gone up. There could be some overseas branches that could have become unviable over a period in relation to business volumes and costs. The bank might look at closing some of these,” Sriram said.

He did not spell out details about the regions or the specific branches   under a scanner.  The bank, Sriram said, would focus on making international branches capable of standing on its own to meet the liquidity coverage ratio (LCR) norms prescribed under the Basel-III guidelines.  At present, these branches depend on resources of the parent (SBI in India).

This entailed costs that were absorbed by operations back home. Foreign operations also have to be viable and gather strength, another SBI executive said. Meanwhile, the bank is forming a subsidiary for its operations in the United Kingdom to meet regulatory requirements. The new corporate structure, a subsidiary, would be in place by March 2017, Sriram added.

The lender had recently upgraded its office in Seoul (South Korea) to a branch to tap bilateral trade flows and investments and also support remittances business. In  another development, State Bank of India (SBI) Chairman Arundhati Bhattacharya said she didn’t foresee stiff competition arising with the coming of the new niche banks as they are yet to come up with a business model that can be termed as viable. This is a significant departure from Bhattacharya’s earlier stand when she had said the coming of the payments and small finance banks would intensify competition that it would lead to a “dog eat dog world”.