Lack of business plans curb Indian banks in US, Europe

Indian banks are spreading wings in Asia and Africa, but when it comes to Europe and the American continent, they are finding it difficult to keep the existing set up intact.

In recent meetings with regulators in the United States and European countries, the Reserve Bank of India has questioned their licensing policies.

These regulators, in turn, complained of lack of specific business models of the Indian PSU banks operating in their countries. The RBI is learnt to have asked the state-owned banks to submit their business plans before applying for permission to expand in Europe and Americas.

Banking sources pointed out that the foreign banks in India have been successful in penetrating and tapping the retail as well as corporate sector.

The RBI does not question their business strategy. However, regulators in the US and European countries are not happy with the performance of the Indian public sector banks.

These regulators, according to a banking source close to these discussions, feel that the Indian banks do not have a business plan or model.

They merely set up offices to tap the depositors from the Indian and Asian community and focus on trade finance. Acting as correspondent offices of India banks, they help in raising letters of credit, guarantees for Indian exporters and importers.

The overseas regulators have also suggested that the Indian public sector banks collectively can form one subsidiary or run one branch office. This, they feel, will remove the duplication of activities by these banks.

The profit generated by this banking company or branch office could be distributed among all these banks.

The State Bank of India has the most extensive overseas operations with 54 branches/offices in 28 countries as at end-September 2004.

The bank has four subsidiaries SBI (Canada), SBI (California), SBI International (Mauritius) Ltd. and Indo-Nigerian Bank Ltd. and three joint ventures in Nepal, Bhutan and Moscow.

Bank of India has 19 branches and four representative offices with presence in centres such as London, New York, Paris, Tokyo, Singapore and Hong Kong.

Bank of Baroda has a network of 57 offices across 19 countries including 38 branches of its own, 17 branches of seven of its subsidiaries and two representative offices and one joint venture having 9 branches.

It has six branches across London, New York, Brussels, OBU Mauritius, OBU Nassau and Dubai.