India to consolidate 35 overseas branches of public sector banks

State-run banks will consolidate 35 overseas operations without affecting their international presence, Rajiv Kumar, secretary, department of financial services wrote on micro blogging site Twitter, adding another 69 operations have been identified for consolidation. Photo: Mint

New Delhi: As part of its efforts to streamline the operations of state-run banks, the finance ministry on Thursday released a roadmap for consolidation of their overseas operations. 

The consolidation will be across overseas branches, representative offices, joint ventures, subsidiaries and remittance centres. 

This comes at a time when the overseas operations of state-run banks are under the scanner following the Rs12,636 crore scam that hit Punjab National Bank. 

The government is examining the lapses in systems followed by overseas branches while giving loans to group firms of Nirav Modi and Mehul Choksi against letters of understanding (LoUs) fraudulently issued by some officials of Punjab National Bank. 

Barring one bank, all the branches who lent to Modi against these LoUs were of state-run lenders. 

In a separate incident, Bank of Baroda was forced to shut its operations in South Africa after its loans to firms owned by three brothers from Uttar Pradesh—Ajay Gupta, Atul Gupta and Rajesh Gupta—considered close to the South African president Jacob Zuma, came under the scanner of the South African regulator for alleged money-laundering.

These incidents along with the need to preserve capital at a time when state-run banks are struggling with high levels of debt and low levels of profitability has prompted the government to kickstart the rationalization process. 

State-run banks will consolidate 35 overseas operations without affecting their international presence, Rajiv Kumar, secretary, department of financial services wrote on micro blogging site Twitter, adding another 69 operations have been identified for consolidation. 

The rationalization of overseas branches is aimed towards “cost efficiencies and synergies in overseas markets,” he said. 

Further, all existing 216 operations of state-run banks in other countries will be examined to check for possible consolidation. 

Banks have been asked to close non-viable operations for cost efficiencies. Also, the finance ministry is pushing for consolidation of operations in the same geography. Banks have also been asked to consolidate equity holdings in joint ventures where more than one state-run bank is a stakeholder. 

According to sources, Bank of India, Andhra Bank, IDBI Bank and Indian Overseas Bank have closed down Dubai operations, while Punjab National Bank, Canara Bank and Union Bank of India have shut Shanghai offices.

Bank of India has also closed down operations in Yangoon and Bostwana, while Bank of Baroda and Indian Overseas Bank have shut Hong Kong branch. In addition, PSBs have also closed down various representative offices.

As on 31 January, 2018, public sector banks had about 165 overseas branches, besides subsidiaries, joint ventures and representative offices. State Bank of India has the largest number of overseas branches (52) followed by Bank of Baroda (50) and Bank of India (29).

The state-owned banks have largest number of branches in United Kingdom (32) followed by Hong Kong and UAE (13 each) and Singapore (12).

(PTI has also contributed to the story)