State Bank of India to scale up global operations through GIFT City

Diversify in trade finance through supply chain funding to MNCs

Country’s largest bank State Bank of India (SBI), with about $80 billion balance sheet size of global operations, will step up focus on doing business through International Financial Services Centre (IFSC), GIFT City, in Gujarat’s Gandhinagar, SBI executives said.

The lender will further diversify its trade finance portfolio by increasing funding supply chains of multinational companies. It had gone slow on trade finance in Q4FY24 as margins were not adequate.

Elaborating on scaling up operations in the GIFT City unit, SBI executives said the cost of operating overseas business from such a centre is low. Also, there are tax benefits and more flexibility to structure financial products. The balance sheet of the IFSC branch-GIFT City was about $8 billion.

 

SBI is also planning to venture into premium banking services overseas by creating a “Wealth Hub”, serving the Middle East and the GIFT City.

According to the executives, SBI has undertaken complete overhaul of the existing trade finance and international banking ecosystem by setting up two global trade finance centres in Kolkata and in Hyderabad to achieve operational excellence and improve market share.

As per SBI’s annual report (FY24), it sanctioned foreign currency loans to the tune of $10.3 billion to India-related corporates and $16.2 billion to overseas entities. The registrations for External Commercial Borrowings (ECBs) by Indian companies almost doubled to $49.2 billion in FY24 from $26.6 billion in FY23, Reserve Bank of India (RBI)’s data showed.

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Highly rated corporate houses and finance companies have looked more at overseas markets to raise money at reasonable cost through ECBs in comparison with the domestic market. This trend will continue as many ECB registrations are utilised in the current financial year (FY25), especially when the capital expenditure cycle is expected to get further momentum, the executives said.

Meanwhile, SBI has informed stock exchanges that the executive committee of its board has approved a plan to raise long-term funds up to $3 billion in single or multiple tranches in FY25. It would raise funds through public offer and\or private placement of bonds in USD or other major foreign currency.

SBI officials said the margins are relatively thin in international operations. While there is stability in yields in the global market, some risks like situation in the US have bearing costs. The actual fund-raise would be subject to market conditions and demand.

The yield on advances in international book grew from 3.80% in March 2023 to 6.14% in March 2024. The cost of deposits rose from 2.10% in March 2023 to 4.03% in March 2024.

During FY24, the bank raised more than $2 billion long-term resources through different channels. It did syndication deals of $1 billion — $500 million for three years and $500 million for five years — in the same period.