Yet to Hear From UK Regulator on Subsidiarisation: SBI

Mumbai: State Bank of India (SBI), the country's largest lender, on Wednesday denied receiving any communication from the British banking regulator asking it to convert branches in the island nation into a wholly-owned subsidiary.

"That is all wrong. I have checked with our London branch and they have not heard from the Prudential Regulatory Authority (PRA)," SBI chairman Arundhati Bhattacharya told PTI in an interaction.

When asked whether the bank is open to the idea of subsidiary route, she said without elaborating that they would like to continue with the branch model.

Ms Bhattacharya said that in fact, the British monetary authority has allowed SBI to open two more branches.

PTI had on Sunday reported quoting a PRA statement that deposit-taking foreign banks that want to remain a branch must have under 100 million pounds in account balances and under 5,000 customers.

Under the new draft norms, the PRA that supervises individual banks, requires lenders from outside the European Economic Area to offer only minimal retail services to insulate them from any possible credit issues at their respective home markets.

While the Bank of England has not named any would-be affected banks, analysts say apart from SBI, another state-run lender Bank of India would also be hit.

The British operations are one of the largest for SBI's overseas business with seven branches. SBI nets 18 per cent of its total business from its vast overseas operations and it is looking at taking this to 25 per cent over the next three years.

The SBI chairperson said that she had a discussion with the regulatory authority and they said the decision on the issue has not been taken so far.

"They have said whatever they do they will give us sufficient time. Even if they feel that we need to have a wholly-owned subsidiary, we will have sufficiently long time of three-four years to get the process in place and do the transition.

"But whether they will want us to do that at all, that also they have not taken a call, and it is something that they will determine later," she added.

As of March 2014, SBI's number of foreign offices rose to 190 from 186 in the previous year, spanning 36 countries. These include 52 branches, eight representative offices, 110 offices of the seven foreign banking subsidiaries and 20 other offices.

During 2013-14, it forayed into two new countries in Botswana in Africa by establishing a subsidiary and in South Korea by opening a representative office. At present, the lender gets 17 per cent of its total profit from global business and expects this to rise to 20 per cent this fiscal year.

Last fiscal year, the bank's net profit fell 22.8 per cent to Rs 10,891 crore from Rs 14,105 crore in FY13.

Subsidiarisation is an expensive and cumbersome process. The RBI has already finalised norms for large foreign banks with over 20 branches to have local arms but is not rough-shoding over them but cajoling them to follow.

Since the 2008 global credit crisis, monetary authorities have been favouring local subsidiaries to ensure better regulation.

Under the new RBI norms, only three foreign banks - StanChart, HSBC and Citigroup - fall under the 20-plus branch category.