Major banking deal: State Bank of India and Bank KEB Hana Indonesia join forces in Indonesia

In a significant development for banking partnerships in Indonesia, State Bank of India (SBI), PT Bank KEB Hana Indonesia, and Bank SBI Indonesia signed a Shareholder Agreement on 10 September 2024. This agreement aims to fulfil regulatory requirements for local shareholding and strengthen collaborative banking operations in the region.

Key Points of the Agreement

Bank SBI Indonesia (BSBII), a subsidiary of State Bank of India, operates in Indonesia with a 99.56% stake held by SBI. To comply with local regulations requiring a minimum of 1% local shareholding, BSBII proposed issuing preference shares to PT Bank KEB Hana Indonesia. Following this arrangement, SBI’s shareholding in Bank SBI Indonesia will be reduced slightly to 99% after PT Bank KEB Hana Indonesia becomes a minority shareholder with a 1% stake.

The signing ceremony took place at Bank SBI Indonesia’s head office in the Graha Mandiri Building, Central Jakarta. It was attended by key representatives including Ms. Jayati Bansal, Deputy Managing Director of International Banking Group (IBG) at State Bank of India; Mr. Park Jong Jin, President Director of PT Bank KEB Hana Indonesia; and Mr. Akash Shambhu Damniwala, President Director of Bank SBI Indonesia.

Strategic Implications and Future Prospects

This strategic move allows SBI to maintain its substantial majority share in its Indonesian subsidiary while aligning with local regulations that promote local participation and governance in the banking sector. The issuance of preference shares also demonstrates a cooperative approach between SBI and Bank KEB Hana Indonesia, a subsidiary of South Korea’s Hana Financial Group.

The collaboration could open avenues for further cooperation in digital banking and customer service enhancements in the Indonesian market, given Hana Financial Group’s established experience in these domains. PT Bank KEB Hana Indonesia is known for its active engagement in the digital banking sector, such as its involvement with LINE Bank, which could potentially benefit Bank SBI Indonesia’s operational strategies.

Broader Market and Regulatory Context

The Indonesian banking regulatory framework mandates foreign banks to hold a minimum percentage of shares locally. This regulation is part of a broader strategy by Indonesian financial authorities to ensure robust local participation and accountability in the banking sector. By signing this Shareholder Agreement, SBI not only adheres to these regulatory requirements but also reinforces its commitment to a long-term presence in Indonesia.

This development comes amidst an increasingly competitive landscape in Southeast Asia’s banking sector, where collaborations and strategic partnerships are becoming crucial for growth and expansion. With the entry of Bank KEB Hana as a minority shareholder, Bank SBI Indonesia could leverage Hana Bank’s expertise in digital banking to diversify its service offerings and improve customer experiences.

The signing of the Shareholder Agreement among State Bank of India, Bank KEB Hana Indonesia, and Bank SBI Indonesia marks a crucial step towards regulatory compliance and enhanced collaboration in Indonesia’s banking sector. It opens up new possibilities for strategic partnerships and growth, particularly in the digital and customer-centric domains.

As banking regulations evolve, such collaborative arrangements are likely to become more commonplace, reflecting a trend toward global-local partnerships that can navigate the complexities of regional markets while delivering value to customers.

This agreement reinforces SBI’s strategic intent to solidify its international banking operations in Indonesia, while also benefiting from Bank KEB Hana Indonesia’s local market insights and digital banking expertise. The partnership is expected to enhance service offerings and contribute to a more dynamic banking environment in Indonesia.