State Bank of India, the nation’s top lender by assets, has launched a new wealth management services unit, and branches to cater to start-ups, as competition with private sector rivals is rising and as its core business is seeing sluggish growth.
The wealth management unit and the first bank branch for start-ups will begin operations from India’s technology hub Bengaluru before these are expanded to other parts of the country, SBI, majority-owned by the Indian government, said in a statement.
SBI is not looking to lend to start-ups immediately but will offer advisory services such as setting up a company to taxation related issues, Chairman Arundhati Bhattacharya told a news conference.
The more than two-century old bank that accounts for about a quarter of Indian bank deposits and loans is modernising its operations, growing its retail business faster and adding new segments to take on new-age private sector lenders whose profitability is higher than their state-run rivals.
India was the world’s fastest growing wealth management market in 2014, according to a CapGemini and RBC Wealth Management study, spurred largely by rising personal income as well as a boom in e-commerce start-ups that has also attracted marquee foreign investors.
Indian banks including SBI have seen their credit and deposit growth slowing in recent years amid an economic downturn. Loan growth is expected to pick up this financial year after falling to an almost two-decade low.
SBI’s foray into the wealth management business comes at a time when foreign banks are scaling down operations in the segment due to high cost of operations and regulatory restrictions.
Rajnish Kumar, a managing director at SBI, said the bank aimed to first target in-house customers for the wealth management business. It will simultaneously chase high-income individuals and professionals such as doctors and lawyers.
SBI will look at setting up a small fund to invest in start-ups, Chairman Bhattacharya said.