Public banks ride India Inc to venture overseas

Three of them set up branches abroad in the first week of August

MUMBAI: Public sector banks are increasingly looking at foreign soil to open shop, with three of them setting up branches overseas in the first week of August. Moreover, it is not just the non-resident Indians (NRIs) they are targeting.

Bank of Baroda on August 2 upgraded its representative office in Guangzhou, China, to a branch.

Just a day earlier, Union Bank of India opened its first overseas branch in Hong Kong.
On August 6, it was the turn of Canara Bank to open a branch in Shanghai.

Union Bank of India chairman and managing director M V Nair told DNA Money last month that his bank was in the process of applying to the Reserve Bank of India to open 10 more representative offices and branches. The bank currently has a representative office each in Shanghai and Abu Dhabi.

What is driving these banks to venture abroad? T Y Prabhu, executive director of
Union Bank of India, said the reasons are manifold and catering to the NRI segment is just ‘incidental’.

“One of the many benefits of opening an overseas branch is that these days, a lot of Indian companies are buying companies abroad. By opening a branch in another country, we can take up their financial requirements there,” he said.

Overseas branches can participate in loan syndication for acquisition by Indian corporates, Prabhu said.

Venturing abroad would also provide the banks an exposure to financial markets that they could put to good use in India. “Trade financing, facilitating remittances of the diaspora and financing local industries are the other reasons for setting up a branch abroad,” he added.

An official from Bank of India agreed with Prabhu in that it is the “globalisation story of Indian companies” that is making public sector banks venture abroad.

“The base is, however, provided by the Indian diaspora,” he said. He added the trade between India and another country is one of the main criteria in opening a branch there.

Bank of India will open a branch in Dubai before the end of this month and plans to convert representative offices in Johannesburg and Beijing to full-fledged branches soon. The bank has an overseas branch strength of 23.

A senior Bank of Baroda official, requesting anonymity, said that a considerable Indian population is the prime consideration. “We also look at developing the local business,” he added. He said his bank’s objectives are very territory-specific.

The official also mentioned the UAE is one of the markets with a very high potential, because of the construction boom there.

Bank of Baroda currently has 73 branches in 25 countries. Plans are afoot to open 9 more branches this fiscal.

State Bank of India, the country’s biggest, has the widest reach overseas, with 84 offices in 32 countries. State Bank officials were not available for comment.

Another big lender, Punjab National Bank, has 3 representative offices, 2 branches and a subsidiary unit in the UK. It has received RBI approval to upgrade its Shanghai representative office to a branch, to open an overseas business unit in Singapore and a representative office in Norway.

Despite the flurry of activity so far this month, bankers admit that that the pace of rolling out overseas branches is highly dependent on the local regulatory environment.

g_seetharaman@dnaindia.net