SBI not to extend fresh loans and investments in Maldives due to political turmoil

The State Bank of India has decided not to extend any fresh loans or make new investments in the Maldives until the political situation improves there. SBI's three branches enjoy a dominant position in the island nation, holding a quarter of its deposits and 42% loans.

"We will not take any fresh exposure till June this year," said a bank official.

Maldives plunged into a political turmoil last month after protesters, backed by police, toppled Mohamed Nasheed, Maldives' first democratically elected leader. An e-mail sent to the bank's international banking division drew no response.

According to the external affairs ministry, SBI has been playing a vital role in the economic development of the Maldives since 1974 by providing loans for island resorts, marine exports and businesses.

In 2009, SBI bailed out Maldives from a severe foreign exchange crisis when it subscribed to $100million dollar-denominated treasury bonds issued by the Maldivian Monetary Authority, an Indian government official said.

SBI's gross interest income from global operations rose from Rs 70,993.92 crore to Rs 81,394.36 crore in 2010-11, registering a growth of 14.65% in a year.

India Inc's exposure in Maldives is quite substantial. While hospitality major Taj Group runs two hotels, infrastructure company GMR is participating in developing the Male International Airport.

In August 2011, the Export-Import Bank of India ( Exim Bank) issued a line of credit (LoC) of $40 million to the Maldives government for financing purchase of eligible goods, services, machinery and equipment, and consultancy services from India for construction of 500 housing units in Maldives.

Source: EconomicTimes