The Hindu : Steep drop in major banks' overseas profits

Online edition of India's National Newspaper
Wednesday, Apr 23, 2003

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Business

Steep drop in major banks' overseas profits

NEW DELHI APRIL 22. Major banks including SBI, Bank of Baroda, Bank of India and Canara Bank, posted an overall 291 per cent fall in profits from foreign operations at $35.91 million in 2001-02, prompting a Parliamentary panel to strongly recommend closure of unviable overseas branches.

The Standing Committee on Finance, headed by N. Janardhana Reddy, has asked the Reserve Bank of India to fix a timeframe for BoI's East Ham (London), BoB's Vacoas (Mauritius) and Indian Overseas Bank's Colombo branches to improve profitability.

"In the case of further erosion of profitability continuing even after the end of such period, the RBI may initiate steps to close them without any delay," it said in a report tabled in Parliament.

The total net profit of all the nine Indian banks fell by over 291 per cent to $35.91 million in 2001-02 from $140.66 million in the previous year.

The banks were conducting overseas operations through 94 branches, 14 subsidiaries, 14 representative offices and five joint ventures spread over 24 countries. Of the nine banks, the worst hit was State Bank of India, whose foreign operations yielded just $0.95 million profits in 2001-02 against $57.65 million in 2000-01 and $42.23 million in 1999-2000.

SBI's net took a hit mainly due to a $7.5 million penalty imposed by U.S. regulators for deficiencies in systems and procedures in remittances, fund transfers and inter-office accounts.

Taking note of this, the panel said "The RBI should ensure strict compliance with the rules and regulations of the host countries where the overseas branches operate".

"Had this been done earlier, the penalty imposed on SBI could have been averted," the committee said. Bank of India's overseas profits fell almost 50 per cent to $19.35 million in 2001-02, while Bank of Baroda witnessed 28 per cent dip in profits at $23.40 million.

Profits were lower also for Indian Bank, Indian Overseas Bank, Syndicate Bank and Canara Bank. Only UCO Bank and Bharat Overseas Bank reported increase in net profit in 2002. UCO Bank's net profit rose to $10 million while that of Bharat Overseas Bank to $1.61 million.

The Government meanwhile approved the proposals of ICICI Bank to form subsidiary in the U.K. and Canada, open offshore branches in Singapore and Dubai, and representative offices in Shanghai and Dubai.

The Government also allowed PNB to open representative offices in Shanghai, Dubai and London, while Bank of Baroda was allowed to form a subsidiary in Tanzania and an office in Guangzhou, China.

UTI Bank obtained permission to open office in Dubai, while IndusInd Bank got the nod to foray into London and Dubai.

PTI

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