India: State Bank of Mauritius may become first to open local subsidiary

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MUMBAI: State Bank of Mauritius (SBM) is likely to become the first foreign bank to open a wholly-owned subsidiary almost four years after the Reserve Bank of India (RBI) allowed overseas lenders to open local units in India.




SBM has already registered a local subsidiary, called SBM (India) Ltd, which will manage the local branches in the country.

SBM is awaiting a final approval from RBI and has laid out an ambitious business plan for what will be the largest market for the government-owned lender from the island nation. Siby Sebastian, India CEO at SBM, said:

We have identified 25 to 30 SME and retail clusters and our distribuion is targeted around that. We expect to start 30 to 40 branches within five years in tune with the different branch formats allowed by the RBI.

SBM has already registered a local subsidiary, called SBM (India) Ltd, which will manage the local branches in the country. SBM has operations in Madagascar and Seychelles besides Mauritius. Earlier this year, it completed the acquisition of Fidelity Bank in Kenya as part of its expansion in Africa.

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Through India, SBM plans to tap the India-Africa trade corridor and also the huge opportunity it sees in the consumer and SME sections. Sebastian said:

I think we are at the bottom of the downside and the economy will only expand from here, so this is the right time to invest in India. We are already seeing a pick-up in economic growth post the June quarter in the residential and consumer side. The fact that a lot of people who were earlier not in the formal financial system are also coming in along with increased distribution capabilities of private sector banks, NBFC’s and fintech lending platforms will expand the market especially in SME and retail banking.

A local subsidiary will require SBM to appoint a local board with at least half the members from India. Former IndusInd Bank executive J Moses Harding, who is an advisor to the chairman and board of directors of SBM Holdings, the holding company of the bank, is likely to join the India board.

SBM opened its first India branch in Mumbai in November 1994 but has never done retail banking in India. It has three other branches in Chennai, Hyderabad and its suburb Ramachandrapuram. 

It has just started building a mortgage book in the country and will also commence lending to SMEs starting next month. But at around Rs 1,000 crore (Rs 5 billion), the bank’s loan book size is very tiny.

Sebastian said capital will not be an issue:

We are well capitalized as a foreign bank at present and we might need another Rs 20 crore (Rs 100 million) to make the Rs 500 crore (Rs 2.5 billion) capital mandated by RBI for a local unit and we will get it when required. We will be transferring the branch capital into the subsidiary.

DBS Bank, Singapore’s largest lender, is the other bank with an in-principle approval from RBI to start a local subsidiary in India and is likely to follow SBM in opening a local unit.