SBI to focus on non-banking businesses for major expansion

State Bank of India (SBI) India's largest public sector lender in order to ensure the group remains on a strong growth path it is trying to push growth in its non banking businesses as the banking business pace is getting slow.

SBI has chosen broking business for its major expansion drive for this year, which comes under SBI Capital Markets (SBICAPS).

This year due to increase inflation the share market has gone down and the situation has not improved. SBICAPS has missed out strongly in Bull Run in equities therefore it has decided to expand its broking presence in tier 2 and tier 3 cities.

“We are trying to leverage the huge network that our parent has and use that as an advantage of existing players,” said A P Verma, MD & CEO, SBICAPS.

Working on the process this year SBICAPS' broking subsidiary has already opened 5000 new broking accounts and has worked out plan for adding another 50,000 accounts in the coming year.

As SBI is working through for increasing its retail presence in the broking business, it is being expected that the revenue from the division will contribute just Rs 100 crore to the kitty because of the low margin nature of the business.

On the other hand SBICAPS is trying to enhance its presence in higher margin areas like loan segment and project financing.

Over the next year, SBICAPS have made plans to earn significant revenue especially from large power projects that are in the pipeline.

"We are involved in all the major power projects and expect to be a big player there,” added Verma.

SBI’s mainstream business is of lending and recent shift in focus towards non-banking subsidiaries points out that in the coming months the credit growth is going to slow down even further.

Slow down in credit growth will add pressure on the State Bank Group's consolidated finances, hence the top management expects that businesses like SBICAPS will help in reducing some of that pressure.