India’s Largest Bank SBI open to collaborate with foreign banks: C S Shetty

State Bank of India’s Chairperson, CS Setty, has said that the country’s largest bank is open to collaborating with foreign banks if the Reserve Bank of India (RBI) allows local banks to engage in acquisition finance. C S Setty acknowledged that the “MNC (multinational companies) banks” are dominant in the space.

“Yes, I think some of the MNC banks are very well into this activity. We don’t mind collaborating with them,” Setty said as quoted by news agency PTI.

He said that SBI has always been doing outbound acquisition finance and has also gained considerable expertise in this aspect. He further said that SBI can also use its in-house investment banking unit SBI Capital Markets’ expertise for such deals. He also said that – State Bank of India is well-positioned to support outbound financing due to its deep understanding of domestic corporates.

Setty added that the bank is still evaluating the Reserve Bank of India’s recent decision permitting acquisition financing and will finalise its stance shortly.

However, Setty said that SBI has reservations about the RBI’s proposal to limit total M&A-related lending to 10% of a bank’s core capital. He said SBI, through the Indian Banks’ Association, plans to take up the matter with the regulator. He also clarified that any future merger and acquisition financing will be handled by the bank’s existing corporate finance division, and there are no plans to create a separate vertical for this purpose.

Meanwhile, Setty said that it will be launching a newer version of its mobile application Yono by the end of December this year, and added that it will be a completely revamped version of the app. The bank is targeting to more than double the overall number of mobile banking users to 20 crore in an unspecified time, and the new version of the app will be able to handle the traffic that comes through it, Setty said.

This statement comes amid recent Reuters reports that the Government of India is considering increasing the foreign direct investment (FDI) limit in state-run banks to as much as 49%, more than double the current cap of 20%.

The finance ministry has been in talks with the Reserve Bank of India (RBI) over the proposal for the past two months. As per sources, the move is aimed at narrowing the regulatory gap with private banks, where foreign ownership of up to 74% is permitted. Recently, Foreign interest in India’s banking sector has risen sharply. Emirates NBD recently invested $3 billion deal to acquire 60% of RBL Bank and Sumitomo Mitsui Banking Corp invested $1.6 billion in Yes Bank.

India’s state-run banks with combined assets of ₹171 trillion as of March, account for 55% of the country’s banking system. Despite the planned hike in foreign investment limits, the government intends to retain at least 51% ownership in these banks Current foreign shareholding in state-run banks ranges from nearly 12% in Canara Bank to close to zero in UCO Bank. While the RBI has recently eased several banking rules to attract more global capital, safeguards such as a 10% cap on voting rights for a single shareholder will continue.

Also Read: Government may increase FDI limit in PSU Banks to 49%