Russia's biggest financial institution, Sberbank, has unveiled an ambitious three-year strategy to significantly grow its footprint in the Indian market. The plan includes a substantial branch network expansion, strategic investments in Indian financial instruments, and foraying into new business segments beyond traditional banking.
Branch Expansion and Strategic Investments
The bank's top executive, CEO and Chairman of the Executive Board Herman Gref, confirmed in New Delhi that Sberbank has formally requested permission from Indian regulators to open up to 10 new branches across the country. This move aims to support a phased business expansion over the coming 36 months.
Currently operating two branches and an IT unit in Bengaluru, Sberbank intends to broaden its service scope. The strategy involves ramping up its existing B2B (business-to-business) operations and strategically entering the B2C (business-to-consumer) segment to serve retail customers directly.
A key component of the plan is to channel surplus Indian rupees accumulated from bilateral trade into the country's debt market. Sberbank will invest these funds in Indian government securities. Simultaneously, the bank is creating avenues for Russian investors to park their capital in Indian equities, specifically Nifty stocks.
Addressing Trade Imbalance and New Ventures
The expansion drive is closely linked to addressing the trade imbalance between India and Russia. Gref highlighted that a staggering 80-85% of payments for India's exports to Russia are currently processed through Sberbank. Following the Ukraine conflict, the bank witnessed a 14-fold jump in transaction volumes, largely driven by India's increased import of discounted Russian oil.
This surge has led to a substantial accumulation of Indian rupees in Russia. To utilize these surplus funds, Sberbank is not only looking at bonds and stocks but also developing a specialized financial product to facilitate gold imports from India. Furthermore, the bank is actively working with companies from both nations to diversify bilateral trade beyond traditional goods, aiming to boost Indian exports to Russia.
Beyond Banking: Education and Hedging Mechanisms
Sberbank's ambitions in India extend well beyond the financial sector. The lender has initiated discussions with a local partner to enter the education space, with a focus on establishing engineering schools. This indicates a long-term commitment to the Indian market.
On the financial infrastructure front, Gref emphasized the critical need to develop robust hedging tools for the rupee-rouble trade. To ensure better price discovery and reduce dependency on third-country settlements, Sberbank is collaborating with an exchange in Dubai. The bank also plans to bolster its Indian workforce, increasing from the current 900 employees, and is setting up a new technology centre in Hyderabad.
