The State Bank of India opened a Shanghai branch Thursday, becoming the first Indian bank to conduct commercial operations in China.

India's biggest commercial lender said it plans to capitalize on the booming trade and commercial linkages between the two Asian giants and offer a complete range of financial services to local clients.

China is set to fully deregulate its banking market to overseas companies in December, allowing them to accept yuan-denominated deposits and make domestic-currency loans.

"The opening of the Shanghai branch will go a long way in facilitating trade and investment flow between our two great nations," said Chairman Om Prakash Bhatt.

Trade between China and India hit a record US$18 billion last year, compared with US$13.6 billion the year before. The two countries expect the figure to top US$20 billion by 2010.

Bhatt said that while China is acknowledged as the manufacturing hub of the world, India has flourished in the services sector and "between them they have been the fulcrum for the world's growth."

The SBI set up a representative office in the city in 1997. The lender received the go-ahead from the China Banking Regulatory Commission to upgrade the office to branch status this year.