State-owned banks significantly reduced their overseas branch presence by nearly one fourth after unravelling of over Rs 12,000 crore scam at Punjab National Bank (PNB).
According to data released by the Reserve Bank of India (RBI), in the financial year ended March 2019, public sector banks (PSBs) reduced their overseas branch presence from 165 at the end of FY 2017-18 to 128 at the end of FY 2018-19, thereby reducing 37 branches or almost 22.5 per cent.
Besides, the PSBs also reduced the number of representative offices and closed 12 offices, thereby bringing their number down from 29 in March 2018 to 17 in March this year.
Little change in presence of private banks
while state-run banks consolidated overseas operations, aiming for cost efficiencies and synergies in overseas markets, private banks made little changes in their foreign presence. As per RBI data for fiscal 2018-19, the total presence of private lenders remained the same, with one overseas branch shutting down but a new representative office being added.
“Indian PSBs substantially reduced their overseas presence in terms of branches, representative offices and other offices with the objective of cost efficiency through shutting down of unviable foreign operations and rationalisation of multiple branches in same cities or nearby places,” said the RBI in its report on ‘Trend and Progress of Banking in India 2018-19’.
Weeks after the scam at PNB, perpetrated by designer jeweller Nirav Modi came to light, the then banking secretary Rajeev Kumar had said that the state-owned banks will “consolidate 35 overseas operations without affecting international presence of PSBs in these countries.”
While these operations include bank branches, joint ventures, subsidiaries, remittance centres, and representative offices, he said that another 69 operations have been identified for further review. Kumar pointed that the move was aimed towards cost efficiencies and synergies in overseas market.
In line with the same, the Reserve Bank data shows that a total of 49 operations, including 37 branches of state-run banks, were reduced during the year and the overall numbers came down from 260 in March 2018 to 211 in March 2019.
The biggest reduction was seen in case of Bank of Baroda (BoB), which saw its overseas branches come down from 50 to 36. State Bank of India’s (SBI) branch numbers came down from 52 to 40 from FY18 to FY19.
The scam perpetrated by Nirav Modi involved several overseas branches of state-owned banks other than PNB.
However, there was no major impact on the presence of private sector banks. Data from the central bank shows that while there were 20 overseas branches and 19 representative offices of private sector banks as of March 2018, the numbers remained almost constant.
The number of branches reduced by one but at the same time, they saw an addition in the representative offices.
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