As part of its global expansion plans, the State Bank of India is targeting a $100 million acquisition overseas.
SBI has so far acquired three small banks - Indonesia's PT Bank IndoMonex, Mauritius-based Indian Ocean International Bank and Kenya's Giro Commercial Bank Ltd. The cost of these acquisitions was less than $10 million.
"Now, SBI is open to acquiring medium-sized banks overseas," A K Purwar, SBI chairman said. He also announced that out of 14,000 SBI branches, 10,000 have been connected to the core banking solution.
Purwar said SBI has identified an acquisition target in Bangladesh, but declined to name the entity. "We have to follow local (Bangladesh) laws and wait for things to move," he said.
SBI is keen on expanding in the South Asian region by opening branches in Pakistan. It is in the process of seeking theReserve Bank of India's nod before approaching the Pakistani banking sector regulator.
On plans to upgrade its offshore banking unit in Singapore to a full-fledged branch, Purwar said SBI is confident of getting the Monetary Authority of Singapore's nod and expects the bilateral Comprehensive Economic Cooperation Agreement to facilitate the process.
SBI is also mulling a mega Tier 2 bond issue in June-July 2006 to support credit growth. The bank raised Rs 3,300 crore of Tier 2 capital in December 2005 and it was sufficient to support credit growth till March 2006.
It is facing a liquidity squeeze, following redemption of Rs 33,000 crore of India Millennium Deposits in December, amid a strong demand for credit.
"We are in the process of estimating capital requirement for the next fiscal. We have enough headroom to raise funds through subordinated bonds and would tap market somewhere in June-July 2007. Its would also look at using hybrid capital instruments at the end of calendar year or early 2007," Purwar said.
The loan book has grown at a healthy 30 percent this fiscal with demand across all sectors - corporate, retail, agriculture and infrastructure. A similar trend is expected over the next three years, the chairman said.
This huge growth in advances is putting pressure on liquidity, leading to hardening of interest rates. SBI would review the situation after the Union Budget is presented on February 28, Purwar added.