SBI to foray into international bond trading via OECD bonds

State Bank of India (SBI) will foray into international bond trading through its foreign offices. The bank proposes to do this by trading in Organisation for Economic Co-operation and Development (OECD) bonds that are less risky than dollar-denominated bonds and, hence, less volatile.

SBI will gradually increase its exposure to international bonds in foreign currency denomination.

OECD is an association of 30 most developed countries with stable economies, and bonds issued by them are known as OECD bonds.

According to banking sources, the public sector giant will integrate its treasury business at its foreign offices, consolidating the operations in three key hubs "" Hong Kong, London and the United States.

While Hong Kong will take care of SBI's entire East Asian treasury operations, the European and American markets would come under the purview of its London and US arms, respectively. Initially, SBI's Middle East operations will be monitored through the Bahrain office, which at a later date will get merged with the London arm. Likewise, gradually, the bank's treasury operations in individual foreign offices will be merged with either of the three key markets.

SBI is also exploring the option of overseas loan syndication for corporates abroad. It has entered into a dialogue with its clients in Sri Lanka and Bangladesh.

The idea is to expand its foreign operations, said the banking sources. Currently, SBI only offers vanilla products like trade finance and letter of credit for Indian corporates.

Meanwhile, the bank is also looking at more acquisitions and, for the purpose, it has initiated talks with banks in Kenya, Bangladesh and Indonesia among others. Further, SBI is in the process of setting up branches, one each, in South Korea, Shanghai and Angola.

Through a series of international acquisitions, this premier state-run bank proposes to establish itself as a global bank. In February 2005, SBI picked up a 51 per cent stake in Mauritius-based Indian Ocean International Bank Ltd (IOIB). Moreover, it set up representative offices and branches in Sydney and Muscat. Meanwhile, on account of the stringent capital adequacy norms of the Central Bank of Nigeria, SBI merged its Nigerian subsidiary, Indo Nigerian bank, with NAL Bank. The merged entity will be a universal bank, armed with NAL Bank's vast experience in corporate/investment banking.

SBI proposes to double its global assets from the current level of $13 billion to $26 billion over the next few years. It is targeting an income of $100 million from its overseas operations this fiscal, against $50 million in the preceding fiscal.

In a bid to boost income growth from its overseas operations, the public sector behemoth plans to expand its global reach to 75 offices.