State Bank may enter cross-border leasing
Sitanshu Swain
Mumbai, Jan 20: The State Bank of India is considering an entry into cross-border leasing shortly. "The bank is in the process of examining the pros and cons of this business before finalising its strategy," said an SBI official, adding that it has a huge potential in the era of cross-border joint ventures.Both the domestic and foreign branches of the bank will be pressed into service for the international operations. Financial parameters like the spread, exchange rate, laws of the particular land have to be properly evaluated before seeking the approval of the Reserve bank of India, sources said. The bank, which recently launched shipping leasing business, has also plans to enter aircraft leasing. "There is a huge domestic market in aircraft leasing - each deal could be worth around Rs 50 crore to Rs 60 crore,'' officials said. On an average, the returns in the leasing business are better than in the term-lending business, the officials said. The leasing business, which the bank started as a
strategic unit a year ago to write only big-ticket leasing, has so far got a major chunk of work from captive power plants and the `Own-your-wagon' scheme. Currently, the bank is evaluating some telecome projects. The bank undertakes leasing business only worth over Rs 5 crore and with a maturity of seven years to ten years. "In the near future, the bank's leasing activities can be synergised with other departments, like project finance and corporate accounts group," said the officials. "We are gradually moving towards a single-window service concept." The bank, which has just two branches in Mumbai and Chennai, plans to open leasing finance branches in Calcutta, and Delhi shortly. Though other banks, including the Union Bank of India and the Bank of India, are in the leasing business, the SBI's main competitors are financial institutions like Industrial Development Bank of India, Industrial Credit and Investment Corporation of India and Industrial Finance Corporation of India. Despite slack
economic conditions, the bank expects a minimum business level of Rs 500 crore during the current fiscal. The bank's sanctions so far in the current fiscal have been in excess of Rs 300 crore. Leasing as a normal funding option for capital expenditure is not yet popular with Indian corporates. In a bid to popularise the concept with corporates, the bank is proposing to strengthen its efforts in this regard, said the sources. The recent shake-out in NBFC activities has made no impact on the SBI service in this regard, as the bank writes only big-ticket leases."Present conditions affecting NBFCs may curtail the activity in small-ticket leases or expand the business of banks writing small-ticket leases," said the official, adding that business levels for the SBI are rather influenced by the general economy and industry conditions.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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