The country’s largest bank, State Bank of India (SBI), with about $80 billion balance sheet size of international operations, will step up its focus on doing business through the international financial services centre (IFSC) GIFT City at Gandhinagar in Gujarat, SBI executives said.

The lender will further diversify its trade finance portfolio by increasing the funding supply chain of multinational companies. It had gone slow on trade finance in Q4 FY24 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 GIFT City is low. Also, there are tax benefits and more flexibility to structure financial products. The balance sheet of the IFSC branch at 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 GIFT City, Gandhinagar.

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

Highly rated corporates and finance companies have looked at overseas markets to raise money at reasonable cost through ECBs compared 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 gain further momentum, SBI executives said.

The share of international operations is 11 per cent of the total balance sheet. While it will continue to grow in absolute terms, the share in percentage terms may not grow. It would not fall below 11 per cent, given the higher engagement of Indian corporates in global business, they added.

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

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

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

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

First Published: Jun 11 2024 | 7:46 PM IST