Saudi Arabia opens up for Indian banks

The State Bank of India (SBI) has become the first Indian Bank to get branch licence from the Saudi Arabia Monetary Agency (SAMA) to start operations in Saudi Arabia. SBI is likely to engage in trade finance and remittances business, with Indian being the biggest expat community in Saudi Arabia.

Historically most foreign banks operated as joint venture entities with Saudi banks, where they can hold a maximum of 40% equity. Only recently, foreign banks have been allowed to operate through branches. Norms for setting up branches in Saudi are very stringent and one of the prime conditions to give branch licence is that the bank should have a strong domestic presence along with a well established branch network.

Nearly 10 licences have been issued to various banks like Deutsche, BNP, The National Bank of Pakistan, National Bank of Kuwait, JP Morgan and Gulf International Bank, among others.

As worker remittances has emerged as a major source of external finance for many developing countries, the Saudi authority has instructed all banks to introduce inexpensive and convenient channels of remittances. To further tighten the regulatory grip on money transfer firms, a number of such local firms have been consolidated into a new bank called Albilad Bank.

The The Bahrain Monetary Agency (BMA) has recently approved a full commercial bank (FCB) licence for the State Bank of India (SBI), in addition to the bank’s existing offshore banking unit, which was established in Bahrain in 1978.

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