Plans of State Bank of India (SBI) to expand operations in Saudi Arabia have hit a hurdle, with that country’s central bank — the Saudi Arabian Monetary Agency (Sama) — asking it to mostly recruit their citizens as staff. The issue is expected to figure in the ongoing visit of the finance minister P Chidambaram to Saudi Arabia.
SBI has conveyed to the finance ministry its reservations in employing Saudi Arabians as staff beyond a level and wanted Chidambaram to take up the issue in the bilateral meeting, ministry sources told FE. SBI did not respond to an email sent by FE.
The finance ministry is also of the view that it is not fair on the part of Sama to indulge in micro-management of the recruitment process of foreign banks and insist on localisation of banking jobs by reserving jobs for locals in areas, such as retail banking and Human Resources Development, they added.
The ministry sources said Sama’s efforts to ensure localisation of bank staff is part of Saudi Arabia’s drive to reduce its unemployment rate, which is now reportedly around 12%. According to reports, the main problem is that only around 40% of Saudis, who are in the working age category, are looking for jobs actively or are currently employed. A majority of the locals employed are working for the Saudi government, which is finding it difficult to sustain shelling out a huge wage bill and hence the policy focus on boosting employment for Saudi nationals in other sectors. Chidambaram is on a visit to the nation to attend the Saudi-India Joint Commission Meeting scheduled for January 27-28. During the meeting, both sides will discuss matters of mutual commercial and economic interest.
In December 2011, SBI had become the first Indian bank to obtain a branch licence from the Sama. The bank had opened its first branch in Jeddah and is into personal banking, corporate banking including trade finance and NRI services, which also includes facilitation of remittances.
Banking business in Saudi Arabia assumes significance due to remittances sent to India by over 20 lakh workers there, besides India’s trade with that country. According to World Bank data, of the total $69.4 billion India received as remittances in 2012, $8.4 billion was from Saudi Arabia. Saudi Arabia is also India’s fourth largest trading partner. Bilateral trade in the last fiscal was over $43 billion and had hit $32.7 billion during April-November, 2013, registering a 14% year-on-year growth. Despite close trade and people-to-people ties, according to RBI data, SBI was the lone Indian bank to have a branch in Saudi Arabia, while there was no Saudi bank operating in India.