State Bank of India (SBI) is expecting overseas fundraising of Indian companies to gather pace in the next fiscal as domestic interest rates are rising, the state-run lender’s managing director Challa Sreenivasulu Setty said.

External commercial borrowings (ECBs), which had slowed down, will be an important growth engine in the bank’s overseas business in FY24.

“The high interest rates in the domestic market will generate a demand for ECBs among Indian companies. The demand had slowed and mainly the regular public sector undertakings like Power Finance Corporation (PFC) and REC were raising ECBs. Now we expect more companies to line up for foreign credit to keep their costs down,” Setty told indianbankingnews.com.

The overseas business accounts for 15% of SBI’s total book. During the quarter ended 31 December, the bank’s international business grew 21.47% year-on-year to Rs 4,86,360 crore. Deposits grew 27.94% YoY to Rs 1,65,408 crore while the overseas investment book stood at  Rs 59,788 crore.

The trade finance segment of the bank’s overseas book showed a decline in the fiscal third quarter ended December 2022 due to the hardening of yields. “This is a very fluid book which we lend based on the cost of funds. If the cost of funds go up, we run down these advances which are short-term in nature,” Setty said.

SBI’s overseas book consists of ECBs, local syndicated loans and trade finance. 

ECBs by Indian companies touched a high of $52 billion in FY20 but fell 32% to $35 billion in FY21 during the Covid-19 pandemic year. Companies put their fundraising and expansion plans on hold while deleveraging their balance sheets.

There was a slow revival in FY22 and ECB issuances by Indian companies grew by 10% YoY to $38.5 billion, but it was still lower than the peak in FY20.

Setty said the consolidation exercise in the bank’s overseas business is complete and it is set for a growth phase which should be in the region of 10% annually.

“The streamlining and consolidation phase is over and now we are expecting growth back on the balance sheet from our overseas business. We are expecting to grow the book at the rate of 10%,” he said.

SBI recently completed the buyout of the Russian operations of Canara Bank. Commercial Indo Bank LLC (CIBL) was a joint venture with SBI owning 60% stake and Canara Bank 40%.

“This was in the works for the past one year and we recently concluded the buy. This was for better operational efficiency,” Setty said.

SBI has been strategically streamlining its global footprint over the last five years and is now spread across 30 countries. The bank has shifted the back office operations of its overseas branches to Kolkata.