State Bank Of India Opening Uninsured Branch In New York

January 28, 2008 8:56 a.m. EST

Washington, DC (AHN) - India's largest bank will open an uninsured branch in Jackson Heights, New York soon. The U.S. Federal Reserve Board announced that it approved an application from the State Bank of India in Mumbai, India to establish a branch there. The bank has assets of approximately $187.5 billion and the Government of India owns 63.8 percent of the bank, with no other shareholder directly owning more than 5 percent of the bank's shares.

The fact that the majority of shares in the bank are owned by the Indian government was not a factor in the Federal Reserve having to approve an application for the Bank to open a branch bank in New York.

The Bank has other operations in the United States that were opened before approval was required under the U.S. Foreign Bank Supervision Enhancement Act of 1991. One emphasis of the law was to ensure that a foreign branch bank was under sufficient supervision from its home country to ensure that it didn't engage in money laundering.

The proposed Jackson Heights branch would offer a variety of banking products and services. Those would include permissible deposit accounts along with small business loans, remittance, investment advice and trade-related services.

The Bank is engaged in corporate and retail banking and trade finance. However, it also provides life insurance, merchant banking, brokerage, credit card processing and credit information through its subsidiaries. It has offices in 32 countries and operates insured branches in New York City and Chicago, IL, but the proposed branch in Jackson Heights will not be insured.

It might seem odd for the majority shares of the bank to be owned by India's government because in the United States the government does not own businesses. But it is common practice in foreign countries for a government to own a business outright or to own a share of the company.

The Indian government bought 59.7 percent of the Bank's shares from the Reserve Bank of India for approximately $8.7 billion in June 2007 and the government already owned 4.1 percent of the Bank's shares through the Life Insurance Corporation of India, which is a government-owned insurance company.