State Bank of India bullish on Japan business

by Hiroko Nakata

Undaunted by the global financial crisis, State Bank of India is projecting increased growth at its Japanese branches for the financial year to March, according to Japanese regional head Arijit Basu.

“The balance sheet in Japan will show 30 percent to 40 percent growth from the previous year and mark $1.8 billion (in assets minus liabilities) for the business year to March,” Basu told The Japan Times in a recent interview.

The bank’s Tokyo branch focuses on short-term financing mainly for business between Japan and India, with some India-South Korea deals.

State Bank of India, that nation’s largest commercial bank, with a 25 percent market share, opened its first Japan branch in Tokyo in 1980, its third branch in Asia after Hong Kong and Singapore. The bank also has a branch in Osaka that was launched in 1984.

Basu said the tone at the Japanese branches has changed.

“The focus has intensified I would say in the last two years because of the fact that the Indian economy has grown rapidly,” he said.

When the bank launched operations in Tokyo in 1980, the focus was to take advantage of the Tokyo market and take care of trade, mainly imports of raw materials from India to Japan and, to a limited extent, exports of manufactured goods from Japan to India. But the Indian economy at that time was not fully liberalized and had plenty of trade restrictions and barriers.

By 1991, the start of India’s trade and financial liberalization accelerated its economic growth. Since that year, the focus of the bank’s operations in Japan has been financing for exports from Japan to India as well as funding for Indian companies interested in external financing because yen interest rates have been so low.

At the same time, business challenges facing the bank have also shifted, he said.

Thirty years ago, it was hard to get Japanese companies interested. But now the challenge is “how best we, as a bank, can take advantage from the interest of Japanese companies in India and increase our business connections,” he said.

The bank also wants to help Indian companies that are interested in collaborating with Japanese firms, he added.

For the three years until 2008, the number of Japanese companies that had any kind of presence in India jumped from 500 to 800, Basu said.

To help those firms, State Bank of India made business alliances with Mizuho Corporate Bank, Risona Bank and Hokuriku Bank so their clients in Japan could use its local banking facilities in India.

Basu said the Indian economy is widely expected to mark 7.5 percent to 8 percent growth in 2010, backed by 10 percent to 11 percent growth in the manufacturing industry in recent months. In the next three years, growth is projected at 9 percent to 10 percent.

“We see more business opportunities in auto and auto-related sectors as well as infrastructure,” he said.