Banks told to rationalise branches due to NPAs

New Delhi, Dec. 25: The finance ministry has asked state- run banks to look at rationalising their domestic and overseas branches as part of the reform process to strengthen their financials.

The banks have been advised to pursue closure of loss- making domestic and international branches as part of capital saving exercise, official sources said.

There is no point in running loss- making branches and putting burden on the balance sheet, so banks should look at not only big savings but also small savings like these for improving overall efficiency, sources said.

Many banks, including SBI and PNB, have already taken initiative. Besides, Indian Overseas Bank has rationalised the number of regional offices by reducing 10 regional offices from existing 59 with an objective of optimum utilisation of resources and reduction in administrative costs.

With regard to overseas branches, the ministry has asked the lenders to discuss consolidation and take a final call on closing some unviable operations.

The ministry is of the view that there is no need of multiple banks in a single country, sources said, adding that banks can explore a single subsidiary formed with fivesix banks coming together for conserving capital and realising economy of scale.

Besides the subsidiary model, banks are also looking to close down branches or selling off subsidiaries to focus on markets that give them maximum returns.

As part of the rationalisation strategy, PNB is exploring possibility of

■ selling a stake in subsidiary PNB

Bank of Baroda and SBI are also examining the issue of consolidation. BoB has presence across 24 countries through 107 its UK International. branches/ offices. It has 59 branches in 15 countries, while 47 branches operate through Bank’s 8 overseas subsidiaries.

SBI has 195 foreign offices spread across 36 countries.