Sbi Forex Earnings Decline 33% In First Quarter
State Bank of India (SBI) has shown a dip of 33.09 per cent in the foreign exchange earnings during the first quarter of the current fiscal.
The bank has posted foreign exchange income of Rs 92 crore for the quarter ended June 1998 compared with Rs 139 crore earned during the corresponding period last year.
The drop in the income was primarily on account of squeeze in margins and increase in competition, said senior officials of the bank. The fiscal year 1997-98 too saw SBI registering a drop in foreign exchange income by 28 per cent -- from nearly Rs 700 crore to Rs 500 crore. Accepting that SBI has lost share in foreign exchange operations chairman MS Verma cited two factors for this. He said "uncompetitive pricing and our failure to get foreign institutional investors business directed towards us caused this fall." He, however, pointed out that the share of bank's business needs to be "protected zealously."
Sources said that the drop in income is on account of SBI losing its monopoly over servicing the central government's external debt. Traditionally, SBI was the sole external debt services arranger for the government, which is now shared with Bank of India, Bank of Baroda and Canara Bank.
Besides this, SBI officials also pointed out that there is tough competition from other banks in case of oil companies. "Oil majors' have started asking for finer margins which make the deal unattractive for SBI," said senior SBI officials. "The bank will definitely have to gear up to meet competition from other banks in case of oil majors," they added.
Among oil majors as well, SBI has lost its status as the sole forex banker for the Indian Oil Corporation, as other banks were appointed by the central government and IOC to arrange for the forex loans.
Despite this, SBI has posted a net profit of Rs 426 crore during the fist quarter of the current fiscal compared to Rs 320 crore in corresponding period, registering a growth of 33 per cent.
"Thinner margins coupled with tough competition has affected the bottomline, and SBI was unable to compensate the business loss with larger volumes," said bank officials.