Date:15/10/2004 URL: http://www.thehindubusinessline.com/2004/10/15/stories/2004101501630800.htm

Back SBI Nigerian arm needs more capital infusion

Our Bureau

Mumbai , Oct. 14

STATE Bank of India will either have to inject additional capital or rope in a joint venture partner for its subsidiary in Nigeria. This follows the fresh guidelines issued by the Central Bank of Nigeria hiking the requisite capitalisation requirements for banks.

Indo-Nigerian Bank Ltd, which is a subsidiary of SBI, has been in Nigeria for the last 22 years and was set up with a capital of roughly $8 million. As per the latest regulations, SBI will have to inject an additional $180 million to keep the subsidiary up and running.

In a press release issued here on Thursday, SBI has said, "State Bank of India shall, having due regard to the business needs and other issues involved, put in its best endeavour, subject to legal and regulatory provisions, to keep the subsidiary in good standing so that the subsidiary is able to cope with the emerging changes."

The banking industry in Nigeria is undergoing consolidation pursuant to the fresh guidelines issued by the Central Bank of Nigeria in regard to capital structure of the banks. SBI, on account of its long association with Nigeria, considers the emerging opportunities in West Africa and Nigeria in particular as encouraging, the release said.

The SBI Chairman, Mr A.K. Purwar, had recently announced the bank's intention to acquire small stakes in Asian and African banks, by investing around $10-$15 million in each case, instead of buying out banks.

The bank expects overseas operations to contribute 15-20 per cent of its profits in the next two to three years.

SBI, which also has subsidiaries in Canada, Nepal and Bhutan, has applied to the Reserve Bank of India for opening new branches in Asia, Africa and Canada.

Plans are under way to open 16 new overseas offices in the current financial year and raise the banks' presence to 36 countries with a total of 70 offices by March 2005.

At present, SBI has 54 offices across 28 countries and they contribute five-six per cent to its bottom line.

In fact, the bank proposes to raise around $500 million through a bond issue in international markets shortly, in addition to its proposed $250 million external commercial borrowing offering, to fund its overseas expansion plans.