India’s biggest bank opens rep office in Manila

State Bank of India, the biggest bank in India, has reopened its representative office in the Philippines after closing it two years ago.

In a circular letter dated October 20, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Chuchi G. Fonacier said the Monetary Board has “granted authority to State Bank of India to reopen its representative office in the Philippines (and as a) liaison office (it will) deal directly with the public … its function shall be limited to promoting and providing information about the services/products offered (by the bank) and shall not include those of its affiliates.”

The foreign bank’s chief representative in Manila, Roohullah Badruddin, said they have started operations earlier this month after a BSP approval of its certificate of authority in July.

Badruddin said they are content with a representative office for now but is not ruling out future plans of establishing a branch here. “We’re a rep office now but in the long-term, the intention is we could have a foreign branch,” he said.

The BSP currently implements a capital requirement of R2 billion for a new foreign branch, which Badruddin thinks is “too high,”

State Bank of India, also one of the top 50 banks globally with total assets of more than $500 billion, have a number of Indian corporations with local businesses as clients. According to Badruddin, this has potential for growth such as in the business process outsourcing, pharmaceutical and automobile sectors.

The bank first opened a representative office in the Philippines in 1990, maintained it until 2015, and applied for its re-opening earlier this year. The Securities and Exchange Commission approved its registration last June.

The government has expanded the law allowing foreign bank entry in 2014 and since then, the BSP has approved 10 foreign banks – all Asian banks – to put up branches in the country. There are eight more banks, two of which are ASEAN banks, looking to set up shop here.

The amended foreign bank entry law permits foreign banks to acquire up to 100 percent of the voting stock of an existing domestic bank, from the previous 60 percent limit. Basically, the BSP is opening up to 40 percent of the total banking assets to foreigners.

BSP Governor Nestor A. Espenilla Jr. said that aside from the foreign bank applications, they have plenty of other applications for representative offices.

A representative office is limited to promotional functions. It does not derive income from the host country and is fully subsidized by its head office.

Espenilla said that usually, representative offices eventually are upgraded into full banking branches, in some cases in a year or two, after opening a marketing unit.

There are 11 representative offices in the country including State Bank of India. The other 10 foreign banks with representative offices are Wells Fargo Bank, Korea Development Bank, Bank of Singapore, DBS Bank, Japan Bank for International Cooperation, Rothschild (Singapore) Limited, The Bank of New York Mellon, Korea Eximbank, UBS AG Philippines, and the Ogaki Kyoritsu Bank.

State Bank of India has branches in Hong Kong, Singapore, two in Japan, and two more in China.