SBI managing director C. K. Bhattacharya in Calcutta on Monday. Picture by Kishor Roy Chowdhury

Calcutta, April 26: State Bank of India (SBI) has drawn up plans to aggressively enter into project financing to fill the void created by financial institutions.

Leading financial institutions could not undertake project financing in a big way as they faced various problems, SBI managing director C. K. Bhattacharya said. He was speaking at the ‘Banking Conclave’ organised here jointly by the Federation of Indian Chamber of Commerce and Industry (Ficci) and the Indian Chamber of Commerce.

SBI would exploit this opportunity and had already fixed a sanction target of Rs 8,000 crore for the current year, which was 25 per cent higher than that of the previous year, he said. The disbursals will be around Rs 4,000 crore.

The bank is also looking at the infrastructure sector where its total outstanding is in excess of Rs 23,000 crore. “And if we consider commercial lending, our project financing figure will cross Rs 50,000 crore,” Bhattacharya said.

Areas identified by SBI for project financing include petrochemicals, iron and steel, hotels, paper, healthcare, oil and natural gas, coal, paper, paperboards, hotels and healthcare. “Most of the loans which we are giving under project financing are for 8-10 years,” the SBI managing director said.

He said the bank was not too rigid on sticking to the 2:1 debt-equity ratio for lending. For example, in case of financing power projects, the bank is extending loans where the debt-equity ratio is 3.5:1.

The bank has already identified project financing as a separate strategic business unit. According to Bhattacharya, retail finance was also a major focus area for the bank which was becoming lucrative.

He said SBI was in the process of implementing a core banking solution in addition to networking of 3,800 ATMs across the country. ICICI bank is in talks with SBI for using the latter’s ATM network on a pre-payment basis.

On the merger of its seven associate banks with itself he hinted that the bank might not go in for the amalgamation immediately.

“Our seven associate banks are doing extremely well. Three of our associates have become zero-NPA banks. The total business of our associates is expected to cross $1 billion in 2003-04. We want them to become strong local players,” he added.

Bhattacharya said SBI would also expand its international network by opening 10 to 15 branches in the next two to three years. It plans to open branches in West Asia, Africa, Asia, Europe, the US and Bangladesh.

The bank will open branches in Sylhet and Muscat soon.