State Bank of India will provide loans worth six billion rands (USD 557.75 million) to South African businesses over the next two years as part of the bank's plans to expand its operations, a top official has said.
"We think the time is ripe for our South African operations to grow," State Bank Managing Director and group executive of international banking Krishna Kumar told the daily Business Day.
"We think that the South African economy is bound to grow," Kumar added.
The confidence shown by State Bank comes amid slow growth in South Africa, which narrowly beat going into recession in the second quarter with growth of just 0.6 per cent.
State Bank's current loan book of four billion rands is mainly with the corporate sector in the country.
Kumar said risks to banks could be minimised if a procurement chain could be created for people working in rural land to supply retailers in cities.
This view is in direct contrast with that held by most South African banks, which have been reluctant to provide loans to people without title deeds.
With the Indian government having a 58 per cent stake in State Bank, Kumar also shared his views on state's involvement in banking.
"We don't think that for lending to happen you need to have a state bank," he told the daily.
"Government could have a policy rather than own a bank. In India, lending to agriculture is mandated to 18 per cent of the loan book."
Kumar said the government would reduce its stake to 51 per cent to enable the bank to raise the capital to meet regulatory requirements.
"The new Basel 3 requirements require a lot of capital. The capacity for government to own a bank will diminish as Basel 3 kicks in," he said.
