Foreign exchange profit of SBI on downswing

KOLKATA, AUG. 5. State Bank of India is fast losing its hold in forex market operations if its continuous decline in exchange profit for the past three years is any indication.

From a high of Rs. 569 crores exchange profit in 1998-99, the bank's profit came down by 42.18 per cent to Rs. 329 crores in 1999-2000 and dipped further to Rs. 304 crores in 2000-01, SBI sources said.

"It shows that during the period starting April 1999 to March 2001, SBI's exchange profit came down to almost half showing a decline of 46.58 per cent," the sources claimed.

Though the current chairman Mr. Janaki Ballabh attributed the sharp decline to 'stiff competition', SBI sources in the inter- bank forex department here claimed that it was due to shifting of the operations from Kolkata to Mumbai in 1999.

The losses of SBI were a gain for foreign banks. This was due to SBI's decision to shift to the stronghold of foreign banks in Mumbai, they said.

An indication in steady rise in exchange profit of foreign banks could be ascertained from Deutsche Bank. Its exchange profit was only Rs. 59.44 crores in 1998-99, which increased by 38 per cent to Rs. 82.05 crores in 1999-2000.

Deutsche Bank recorded a further jump of 62.2 per cent in exchange profit to Rs. 133 crores in 2000-01.

Forex market sources here said SBI had some inherent advantages over other banks when it was operating from Kolkata. But after shifting to Mumbai, it made itself 'vulnerable' to attacks from technologically strong banks.

HSBC's exchange profit also jumped during the period though in 1999-2000 it had seen some reversal, the sources said. "HSBC's profit went down by Rs.2 crores in 1999-2000 in comparison to 1998-99, but finally increased by 28.38 per cent and reached to Rs. 95 crores in 2000-01."

The same pattern was repeated in case of American Express Bank, ABN AMRO and Banque National De Paris, they said.

"SBI has some advantage which other banks don't have. It has huge merchant bank-up and squaring up facilities, with sale and purchase through which it could have increased its profit, but it was at present unable to take advantage of this," market sources said. The bank, the sources claimed, "in reality was playing into the hands of foreign banks after shifting its interbank dealing to Mumbai."

As such, in a 'zero-sum' game, SBI was losing in the forex field as foreign banks were increasing their profits, they added.

- PTI

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