SBI to buy a second Indonesian bank

08 Nov 2010

1

State Bank of India, the country's largest bank, is getting ready to acquire a second bank in Indonesia and set up a subsidiary in Australia. The bank already has a branch operating in Australia, SBI deputy managing director Pratip Chaudhuri said today.
 
SBI deputy managing director Pratip ChaudhuriThe bank, which had acquired a bank in Indonesia in 2006, has already shortlisted two or three banks out of which one bank will be taken over by SBI through its existing branch PT Bank SBI Indonesia at a cost of $100 million. ''We have shortlisted the names of two or three banks and will zero in on  one of them soon. The bank has a budget of over $100 million for buying a bank in Indonesia, Chaudhuri said.

SBI is also planning a second acquisition in Indonesia as the local law doesn't permit setting up new branches in the country. The bank is also planning to open branches in the Netherlands or Italy and also in Botswana.

Indonesia, as a part of the ASEAN regional group, is a growing economy and Indian companies are stepping up their activities in this country. This provides SBI the right opportunities for it to grow its business in the country, Chaudhuri said. ''We would soon seek regulatory clearance from both the Reserve Bank of India and the Indonesian banking regulator,'' he added.

On setting up a new subsidiary in Australia, Chaudhuri said the bank would like to take advantage of a local law which allows the coexistence of both a branch and a subsidiary. Also, according to a local law, foreign banks, through their branches, cannot accept deposits worth less than $2,50,000.

''By having a subsidiary in Australia, we can have multiple branches in the country and can mobilise deposits worth less than $2,50,000 to grow our business there. We plan to have five to six branches in the country,'' said Chaudhuri. SBI would not be keen on an acquisition in Australia as this will turn out to be expensive.

''When the local law is permitting the bank to set up a subsidiary which can have many branches, it would be cheaper for us to expand our operations through this route. To take over an existing bank, we have to pay a huge premium,'' Choudhuri said. The bank will soon commission a study on the proposed subsidiary in Australia.

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