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State Bank of India looks to broaden UK customer base beyond Indian diaspora

SBI was not willing to exit one of its biggest overseas markets, despite new ring-fencing rules.

The State Bank of India (SBI) wants to broaden its UK customer base beyond the Indian diaspora after pumping £225 million into its retail business as part of new post-crisis regulations.

Bosses of the lender – which is 58.6% owned by the Indian government – said that while they were happy with the status quo, SBI was unwilling to pull out of one of its biggest overseas markets which currently accounts for 20% of foreign operations.

“(An exit) was not the thought at any time, because there are markets which are too important for us and the UK is definitely one of them, and that is because… of the presence of the Indian diaspora and meeting their banking requirements,” SBI’s global chairman Rajnish Kumar told the Press Association.

“When we have a 100,000-customer base and we are the largest (Indian) bank which is present here in the UK, I think it was a no-brainer,” he added.

The Mumbai-headquartered lender spent two years preparing for the formal separation of its UK retail bank from its wholesale operations as part of UK rules meant to protect consumer cash from investment banking risks.

The ring-fencing rules are part of several key reforms introduced in the wake of the 2008 financial crisis, and apply to banks incorporated in the UK that hold more than £25 billion in core deposits from individuals and small-to-medium-sized businesses.

SBI UK’s 12 branches primarily serve an Indian client base, but the new ring fenced bank’s boss Sanjiv Chadha said “incrementally, it will not be so”.

“You initially follow the diaspora, trade and also companies from the native market, but then after you establish yourself, you always want to be more of a local bank,” he told the Press Association.

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Mr Chadha said that of its 35,000 deposit accounts, one third currently have no connection with India, while 70% of its loans are doled out to customers with no ethnic Indian links.

SBI UK is conscious that it will have to do something “extra” top broaden its appeal – like working with landlords interested in obtaining buy-to-let mortgages through limited company structures or “special purpose vehicles”.

“We will choose a segment carefully, we know we will not be a high street bank – but we make sure that the products on which we are focused, we are a very competitive bank.

“So even if the primary bank for a customer is either Barclays or NatWest, but when it comes to these particular products, they should come to us.”

Mr Kumar said there are likely to be some challenges in building up the retail asset book and maintaining margins, but stressed this was a struggle for lenders across developed markets.

It would likely have considered using an EU passport to expand its retail unit across the bloc had it not been for Brexit.

“If we wanted to expand on the continent… we would have taken the advantage of the passporting agreement which would have been available to us. So that may not be available to us now, but it really doesn’t matter to us.”

He said the UK was the main market of interest for retail and that wholesale banking operations would continue both in Britain and the bloc.

“That wholesale banking we will do out of London and Frankfurt and continue to do so.”

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