Banking powerhouse State Bank of India (SBI) will invest around Rs 400 crore into the stockmarket over 1998-99 as equity investment becomes a major line of business for the bank.
SBI chairman M S Verma said that while theoretically, the funds available for investment would be around Rs 1000-1100 crore, or 5 per cent of incremental deposits of Rs 20,000 crore, the full amount would not be invested by the bank. "We see about Rs 400 crore going into equities, as there would also be investments into bonds and debentures", Verma said. The SBI chairman said the equity investment business would be a key income area in 1998-99, and would constitute an important stream of earnings for the bank. SBI, he said, had already started investing in the equities market in a significant manner.
Making it clear that his bank would not "tinker" in the equity investments business, he said SBI was getting into the business in order to be a major player and make significant money from it. "We are not interested in making the market go either way. We will simply operate to make money from this business", he said.
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Verma said SBI had entered the equity markets over the past few days, when the markets were nosediving and attempted to avail of the dipping Sensex. "Any good investor should enter at this point", he said, adding that SBI will have a sizeable portfolio in the equities business. However, Verma ruled out setting up of a separate subsidiary for the business of equities and said the job would be conducted in-house. He, however, declined to divulge figures of how much the bank had bought and sold over the past few days, saying the detailed figures would be available in the next year's balance sheet.
"While there can be a failure in this business, we do not see SBI doing badly at all", he said. The other important earnings line identified by SBI for 1998-99 would be from its associates and subsidiaries. Verma said the income had grown from Rs 40 crore to Rs 50 crore now, but SBI, going by the size of its operations, would not like to dabble in anything less than Rs 100 crore in size. Therefore, Rs 100 crore was what the bank was aiming at from the associates and subsidiaries by way of income.
This apart, the credit card subsidiary, the joint venture with GE Caps, would get under way, albeit delayed, Verma said. SBI would hold 60 per cent in the venture, which is now expected to get under way by end-September or early October 1998.
Verma said the proposed issue of floating rate notes (FRNs) planned last year by SBI, was now off. On the issue of Resurgent India Bonds which SBI would launch following the Budget announcements, Verma said the bank had submitted the scheme to the government and was awaiting the clearance on the tax exemption front, since the scheme was modelled on the lines of an earlier scheme. "CBDT clearance is expected shortly", he said.
He said extensive pre-marketing exercise for the bonds would be launched for the bonds for about 45 days and SBI hoped to mop up at least a couple of billion dollars, he said.