As the regulatory compliance cost eats into the return on equity in some of its European operations, the State Bank of India is planning to convert its branch operation in Paris into a representative office.
Chairperson Arundhati Bhattacharya said Europe is very costly for operations given the fact that capital is so scarce and costly now.
"Currently we have a branch in Paris. We would probably roll it out into a representative office instead of a full-fledged branch. Currently, our return from that office is not as per the benchmarks we have set for ourselves," Bhattacharya told reporters here today.
She, however, said the bank's operations in Frankfurt is doing very well.
SBI has 199 global offices which includes branches, representative offices and subsidiaries, among others. Global offices contribute 16-17 per cent to the topline and 25 per cent to the bottom line for the bank.
Bhattacharaya said the cost of regulatory compliances is huge outside so there is a need to be very careful about where the bank sets its offices.
"In one of our small subsidiaries in the US, in the last three years, we have increased back office positions by 300 per cent, which are related to regulations and compliances, and hold back front office positions by 30 per cent. That is the kind of emphasis we have to give on regulations," she said.
Talking about the British operations, she said the bank has to follow a model that involves setting up a branch to do wholesale banking while retail operations can be done through a subsidiary.
"We have a very large operation in Britain and the regulators there have asked us to go for a dual kind of setting. So we will have one branch which will do wholesale operations and retail operations has to be done through a subsidiary," she said.
"We were expecting that once we set up that subsidiary, we will be able to get the passporting rights into Europe. With Brexit, there has been some uncertainty and we don't know how things will move now," she said.
Bhattacharya said in Europe the regulations are very important and one needs to be proactive rather than being reactive.
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