India Abroad Banking Service - The New Indian Express

India Abroad Banking Service

Published: 02nd March 2014 06:00 AM

Last Updated: 02nd March 2014 08:40 AM

As India inches closer to a situation where there are many more private firms in banking, the older players are rejigging their game plan to focus on strengthening their overseas business.

Having established a strong footprint in the domestic space, both public and private sector banks are exploring the possibility of extending services to international destinations, including countries like China and Pakistan which, historically, are reluctant to take in foreign players. Among those trying to get a foot into Pakistan is the country’s largest banker, the State Bank of India (SBI). In January, Axis Bank, which is India’s third largest bank, became the country’s first private bank to commence operations in China.

As of September 2013, Indian banks have 172 branches abroad and 25 overseas subsidiaries. They have also forged seven joint ventures with international players, and operate 55 representative offices and 29 other offices abroad.

By going from 163 overseas branches a year ago to 172 in 2012-13, Indian banks grew by 4.3 per cent in FY13 over the previous fiscal. This is almost double the 2.7 per cent growth seen by foreign banks in India, which went from 309 branches to 316 branches in the same period.

“There’s tremendous potential both in the domestic space and international markets. Banks, be they public or private, first want to have a strong presence in native locations before stepping up presence elsewhere. For us, with a 200-year history, we are equipped to explore international markets,” says A Krishna Kumar, managing director, SBI, which has the largest overseas presence with 85 offices including branches, subsidiaries, joint ventures and representative offices. Bank of Baroda, which operates 72 offices abroad, is in second place.

In February, Nepal SBI Bank, a subsidiary of SBI, opened a permanent counter at Pashupatinath Temple in Kathmandu. “This is the only banking outlet in the world heritage premises and will cater to the needs of millions of religious tourists,” explains V K Tyagi, COO, Nepal SBI.

For its part, Canara Bank says it will launch 14 overseas branches and increase its share of foreign business to 15-20 per cent from the current 6 per cent over the next two-three years. “We will launch a branch in Johannesburg in the next three months and in Dubai, New York and Frankfurt by September 2014,” explains CMD RK Dubey.

According to the chairman-cum-managing director, the public sector lender is awaiting nod from regulators to open branches in Ontario, Sao Paulo, Tokyo, Abuja, Dar-es-Salaam, Qatar, Jeddah, Sydney, Wellington and Singapore. Currently, Canara Bank has five overseas branches and three representative offices.

The Union Bank of India plans to open at least three overseas branches by year-end. Currently, it operates only one branch in Hong Kong. “We expect to open at least three branches overseas in the UK, Australia and Dubai,” says D Sarkar, CMD.

The bankers say getting regulatory approvals are both challenging and time-consuming. For instance, Mumbai-based Dena Bank, which was to open its London representative office last December, is yet to do so. According to Ashwani Kumar, CMD, the bank has got an approval from the Reserve Bank of India  and  has even met the UK regulator in this regard. “We are behind schedule...these things take time and we hope operations will commence soon,” he says, adding “We have applied to the RBI to open branches in Hong Kong, Nairobi and Johannesburg too. Once an in-principle nod is received from the RBI, we will approach respective governments for their nod.”

The latest entrant in the Indian banking scenario, the Bharatiya Mahila Bank, too has plans to open overseas facilities. Finance Minister P Chidambaram said as much while setting up the bank in 2013.

Industry experts say if they can crack the operating metrics, overseas business can be both economical and profitable. “Thanks to information technology, international divisions will break even much earlier than the Indian branches as they are more technology-intense, which in turn lowers the annual capex,” reveals a PSU banker without divulging specific figures. Consider these statistics. The total income of the Indian overseas branches increased by 28.1 per cent to Rs 36,560 crore ($6.7 billion), while foreign banks operating in India witnessed an increase of income of 13.1 per cent to Rs 52,840 crore ($9.7 billion) in 2012-13.

According to an RBI survey on International Trade in Banking Services released in February, Indian banks operating overseas witnessed higher credit growth than their foreign counterparts in India.

During 2012-13, growth of credit extended by Indian banks’ operating abroad increased by 31.7 per cent to Rs 5,85,570 crore ($107.7 billion). On the other hand, credit extended by foreign banks operating in India increased by only 27.5 per cent to Rs 3,07,700 crore ($56.6 billion).

Similarly, deposits mobilized by Indian bank branches operating abroad increased 45.5 per cent to Rs 3,93,070 crore ($72.3 billion), whereas foreign banks operating in India registered a moderate growth of 3.2 per cent at Rs 2,83,510 crore. Bahrain, Belgium, Hong Kong, Japan, Singapore, Sri Lanka, the UAE, UK and US were the major countries, and together accounted for nearly 92.2 per cent of the total overseas services of the Indian players.

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