The head of India’s state-owned bank is urging expanded trade between Canada and India, and sees a window of opportunity as protectionist tensions and tariff wars threaten to disrupt global trade flows.
Rajnish Kumar, chairman of State Bank of India (SBI), said Indian companies have shown a willingness to invest in sectors from technology to metals, but he also recognizes the chance to participate in areas such as renewable energy and solid-waste management, where Canada can help Indian companies grow.
His comments come at a moment when SBI, which is India’s largest bank, has made Canada a priority market for greater investment in areas such as syndicated loans, mortgages and trade finance. SBI has been in Canada since 1982, with branches concentrated in Southern Ontario and the Greater Vancouver area, advising Indian and Canadian companies and offering deposits, loans and mortgages to the Indian diaspora in Canada.
“We can do much better than what we're doing [on trade]. The levels are not great at [$8-billion] or so,” Mr. Kumar said in an interview at a downtown Toronto hotel. “And there are many more opportunities.”
As one example, he cited growing interest from pension funds and large institutional investors “who are willing to now look at the Indian market for good returns, and safe returns.”
In the midst of tensions with the United States over the North American free-trade agreement, Canada is looking to diversify its trade to be less dependent on its southern neighbour. Canada and India have held early-stage talks about a bilateral free-trade deal since 2010, but have never been close to an agreement, and negotiations for a commitment to protect foreign investment are continuing. Prime Minister Justin Trudeau travelled to India early this year intent on bolstering economic ties between the two countries, but his awkward state visit did little to warm relations.
Last week, Mr. Kumar made his first visit to Toronto since 2000, when he led the credit division of SBI’s Canadian subsidiary during a four-year posting in the city, and also stopped in New York and Boston to meet investors. He was named chairman of SBI – an appointment overseen by Indian Prime Minister Narendra Modi – last October, after more than three decades at the bank.
With roughly $625-billion in assets and nearly 279,000 employees in 36 countries, SBI has broad reach. But the Indian banking sector has also gone through a series of upheavals in the past year and, as the largest public sector bank, SBI found itself in the hot seat.
The country’s sudden and chaotic experiment with demonetization last year, in which it pulled vast numbers of bank notes from the market, shook the economy and left many Indians scrambling to adapt. But it has helped bring more Indians into the formal banking system and prompted more of them to pay taxes, according to Mr. Kumar. That should add to government revenues, which could spur investments in infrastructure and industries to which SBI lends. “So it has a positive impact on the banking system also,” he said.
Indian banks also piled up some US$210-billion in soured loans, absorbing heavy losses that forced banks to bolster their capital buffers. To restore discipline to the market, and help unwind bad debts, the country revised its framework for winding up banks and amended bankruptcy and insolvency rules. Most of the recognition of bad loans happened at the end of the last fiscal year, and the crisis, in Mr. Kumar’s view, “is coming to an end.”
“We are now coming out of it gradually and looking for growth opportunities,” he said, but with tighter risk-management policies. “We have lost quite [a substantial amount of] money, so [we] can’t forget it quite so easily.”
Canada is one of SBI’s five priority markets – along with Britain, Indonesia, Mauritius and Nepal – where “we need to pay more attention, put in more effort, bring in the latest technology,” Mr. Kumar said. The bank plans to increase its lending gradually, mostly in commercial and residential mortgages, as well as syndicated loans. But it will take a measured approach, watching its return on equity closely.
“We want to grow business here,” Mr. Kumar said. “We are here to stay.”