The presence abroad of state-run banks may now be linked to the country’s perceived strategic interests.
The finance ministry is in talks with the home ministry and the Reserve Bank on guidelines for expansion of public sector banks (PSBs) abroad, in sync with India’s relations with other countries.
It also wants insurance companies to converge with banks to provide a wide range of services to customers abroad.
The government may ask banks to explore possibilities in neighbouring countries such as Bhutan, Myanmar and Nepal, as well other countries strategically important to India like Canada and Iran. It could also ask PSBs to diversify to newer territories like Mexico.
“We are looking at convergence of Indian banks overseas, how they match interests of the bank with interests of the country. We are also converging insurance companies with them. Life, health and general insurance; all three will be partnering the banks, so that as Indian companies, they present the full financial sector,” a finance ministry official told Business Standard.
| NUMBER GAME Branches of Indian banks outside the country | |||
| As on Mar 31 , 2011 | |||
| United Kingdom | 28 | Bahamas | 2 |
| Hong Kong | 18 | France | 2 |
| Singapore | 16 | Maldives | 2 |
| UAE | 11 | Afghanistan | 1 |
| Fiji Islands | 9 | Australia | 1 |
| Mauritius | 8 | Cambodia | 1 |
| Sri Lanka | 8 | Cayman Islands | 1 |
| USA | 8 | Channel Islands | 1 |
| Bahrain | 5 | Germany | 1 |
| Bangladesh | 5 | Israel | 1 |
| China | 4 | Qatar | 1 |
| Japan | 4 | Seychelles | 1 |
| Kenya | 4 | South Korea | 1 |
| Sultanate of Oman | 4 | Thailand | 1 |
| Belgium | 3 | Total | 155 |
| South Africa | 3 | ||
“There are so many countries important to us where we have no presence in the financial sector. These are the strategic issues we need to discuss with banks in terms of their foreign expansion. That is something we will do very soon.”
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He said the commercial interests of banks would also be kept in mind.
In 2005, the government had given autonomy to PSBs to take critical decisions, including setting up foreign offices and subsidiaries.
Now, the government again wants a say in the presence of foreign banks.
As on March 31, 2011, Indian commercial banks put together had 28 offices in Britain, 18 in Hong Kong, 16 in Singapore and 11 in UAE. While Indian banks have a reasonable presence in Fiji, Mauritius, Sri Lanka and the US, they have not yet tested the waters in many countries of South Asia.
Among Indian banks, Bank of Baroda and the State Bank of India have the largest presence abroad, comprising more than half the total foreign offices of Indian banks.
In recent years, most Indian banks with foreign dreams have gone to Hong Kong and Singapore because of low operational costs and ease of setting up the business. However, the government feels such operations have not often yielded commercially satisfactory results and Indian banks are competing with one another to get more customers.
So, operations of some of the banks may be ended there and relocated elsewhere.
The guidelines are to be framed in accordance with India’s bilateral ties with other countries, as well as World Trade Organisation commitments to allow expansion of foreign banks in India. Some banks from Japan, the UK, South Korea, Cyprus, Australia and Iran have approached the government for opening offices in India.