State Bank of India is trying to increase corporate lending in Europe. SBI Frankfurt, which has the status of an independent bank in Europe, has traditionally lent for trade financing but now wants to fund Indian business houses in Europe and European firms in India.
In the recent past, there has been a conscious shift in strategy to lend more to European companies, according to an executive with SBI Frankfurt. Now nearly 50 per cent of the bank’s non-trade finance business portfolio consists of syndicated loans to European companies. SBI Frankfurt’s growth in business over the next few years would come from lending to European firms, confirmed another bank executive.
SBI Frankfurt has a loan book of close to €3 billion. The bank’s area of operations includes the Scandinavian countries and most of continental Europe.
"We have shifted our focus to lending to European companies as the risk of default is much lower. While corporate loan growth has been slow in India, the focus in Europe has shifted to corporate loans," the executive said.
Indian companies, too, have been going slow on external commercial borrowings. According to the Reserve Bank of India, external commercial borrowings and foreign currency convertible bonds in April 2017 totalled $395 million against $3 billion in April 2014.
Local lending by SBI’s international offices grew by 17 per cent to $14.94 billion in 2016-17 while India-linked lending declined 5 per cent to $12.30 billion. Local lending accounted for 34 per cent of the international portfolio of SBI, which was second to trade finance’s 38 per cent. Also, the share of local lending increased from 32 per cent to 34 per cent in 2016-17, while the share of India-linked lending dropped from 32 per cent to 28 per cent. In 2016-17, SBI raised $3.8 billion in medium and long-term funds overseas.
The gross and net non-performing assets as a proportion of gross lending in overseas operations for SBI fell by 55 and 34 basis points, respectively, to 2.37 per and 1.42 per cent in March. SBI’s overall gross NPA to gross lending was 6.90 per cent in March and net NPA to net lending was 3.71 per cent.
Total advances by international offices at SBI were Rs 2.86 lakh crore in March, up 7.27 per cent from a year ago.
The writer is on a fellowship, Media Ambassador, India-Germany, sponsored by the Robert Bosch Foundation