SBI gets China's nod to deal in yuan

11 Mar 2010, 0909 hrs IST, Saibal Dasgupta,

BEIJING: SBI has obtained permission from the 

Chinese government to lend in the local currency.

It is set to become the first Indian bank to

enter yuan business and start lending to Chinese companies
in the local currency. "We now expect to do some serious
business in China," C R Sasikumar, SBI's CEO for China
said. "Like other Indian banks, SBI has so far been dealing
in foreign currency only," he added. SBI will begin yuan
operations on March 15.

This is a breakthrough of sorts for the Indian financial
sector because the Chinese government is extremely
careful about choosing foreign banks that can be trusted
to deal in the local currency. "Indian companies borrow
about 700 million yuan from
Chinese banks for supporting their business in
China. Most of this business will move to the SBI
because they will be more comfortable with an Indian
bank," Sasikumar said.

Besides it branch in Shanghai, SBI is planning to set up
two more branches in Guangzhou in south China and in Tianjin, which is close to Beijing. It has a representative office in Tianjin.

"We will be allowed to lend about 1 billion Yuan.
I see no problem in securing good business in the
first year. From second year, we will begin targeting
Chinese companies seriously ," he said. At present,
SBI has about 180 small and medium Chinese companies
using its forex services.

SBI has requested RBI for permission to upgrade
the Tianjin office to a branch. Sasikumar said
Chinese authorities are expected to grant permission for the branch by the next year.