PSBs review languishing overseas operations

Public sector banks are reviewing operations at overseas branches amid a resource crunch. The government’s push for turn-around plans alongside a ~2.11 lakh crore capital infusion programme for state-owned banks has also nudged them into reviewing their overseas business.

The consolidated balance sheet of banks with a cross-border presence, including overseas subsidiaries, contracted during 2016-17. The total assets of branches of Indian banks abroad declined from $231 billion in 2015-16 to $224 billion in 2016-17, according to the Reserve Bank of India.

Lower interest income and rising expenditure resulted in a ‘loss’ for the overseas branches of Indian banks in 201617. Their cumulative income declined by 4.6 per cent to ~43,611 crore in 2016-17 from ~45,730 crore in 2015-16. Expenses rose by 8 per cent from ~41,940 crore in 2015-16 to ~45,300 crore in 2016-17.

Interest income constituted the lion’s share of the revenue of these branches, which generated a major share of their fee income by rendering credit related services and from trade finance and derivative, stocks, securities and forex trading.

The number of overseas branches of Indian banks has increased but there has been a marginal reduction in their employee strength.

The pressure to cut costs and improve efficiency was forcing banks to review their international branch networks, bankers pointed out.

Many of these branches support the expansion of Indian business abroad and also serve the ethnic Indian population. But over years, the business dynamics have changed and the global environment remains subdued. Ashvin Parekh, managing partner, Ashvin Parekh Advisory Services, said business was tough because spreads were shrinking and capital was becoming a concern.

State Bank of India is looking at more local business for its overseas branches so that these outlets become self-sustaining. Bank of Baroda had regrouped its overseas business into four clusters and it would gradually wind down its presence in places that could be served effectively from major centres, an executive with the bank said.

Another banker said many public sector banks had booked their global business in their Singapore operations. The Singapore banking regulator had asked Indian banks to make higher provisions on their global loan exposure, thereby squeezing their profits, he added.

The total assets of branches of Indian banks abroad declined from $231 billion in 2015-16 to $224 billion in 2016-17, according to the Reserve Bank of India