State Bank of India -- Has Cash, Will Lend

Discussion in 'Wall St. News' started by ASusilovic, Mar 30, 2009.

  1. MUMBAI -- State-owned State Bank of India is lending like the global credit crisis never happened as it looks for places to park billions of dollars in new deposits.

    Consumers have shifted tens of billions of dollars to India's state-run banks amid the bailouts of the world's most sophisticated financial institutions and concerns that global problems could infect India's private-sector banks.

    State Bank of India has been the biggest beneficiary of that trend. It is India's largest bank by assets, including private-sector lenders, and is 60% owned by the government, but has remained a traditional lender rather than expanding into other financial instruments that sank many international banks. That conservatism saw its deposit base swell by close to 40% in the three months ended Dec. 31.

    Now, it is on a lending spree, cutting interest rates on loans, snatching customers from competitors and doing its part to prevent India from getting stuck in the global slowdown.

    Subhra Chatterjee, 39 years old and a cellphone company employee in Kolkata, used to have his savings account and his home loan with ICICI Bank Ltd., India's largest private-sector bank. He appreciated ICICI's telephone-banking and online-banking services as well as their bright branches. But in the last six months, his view of private-sector banks has soured as he watched banks elsewhere implode. This month, he flipped his savings and his $40,000 home loan to State Bank of India.


    While banks in the U.S. and elsewhere are cutting back, State Bank of India is expanding. It hired 25,000 workers in the past year, plans to hire 10,000 in the coming year, and is adding 4,000 ATMs and 2,000 branches to its network of almost 10,000.

    The health of State Bank of India and India's other state-controlled banks, plus their willingness to ratchet up lending in tough times are reasons why India's growth is relatively healthy compared with other economies. In the coming year, India's economy is expected to expand at 6%, down from close to 9% a couple of years ago.


    The company is sitting on close to $20 billion in cash above the amount it needs to operate.