RBI?s survey on international trade in the banking sector has revealed some interesting and, at the same time, concerning data with respect to foreign banks and overseas branches of Indian banks. As per the data, there has been a significant decline in the number of branches a and subsequent decline in the number of employees in foreign bank branches in India. On the other hand, an increase has been reported in the number of branches of overseas branches of Indian banks
A foreign bank branch is type of branch of a bank that is subject to regulations of the jurisdiction it is located in as well as the jurisdiction of its home country. Banks normally open these branches globally to provide services to their customers with a global presence. These kinds of bank branches thus play an important role in trade. Some of their advantages include providing external finance to export firms, avoiding information asymmetries, facilitating financial globalization and so on. For instance, if A is an exporter who has an account with SBI bank such that he gets a business opportunity to either trade with Indonesia or with Vietnam. Besides considering other factors, A will also consider the fact that since there is a branch of SBI in Indonesia, it will make transfer of documents easier, procurement of funds convenient and other such benefits. Financial globalization has been believed to cause rise in growth rate in India. It helps India to bring new and innovative banking facilities and provide a cushion to weaker banks to the country in case of any contingency. They compel domestic banks to be more efficient by offering competition.
The main disadvantage of foreign banks is lack of wide reach within the foreign country. Even though these branches connect the host country with the home country, they at most one or two branches within that foreign country. As a result, the traders will first have to approach them in that particular city rather than their own.
Coming back to the data revealed by RBI, it has been observed that the number of foreign bank branches in India has fallen from 317 to 286 this year in comparison with years 2015-16. Consequently, the employee strength in these banks has also reduced from 26,642 to 24,766. Very limited growth in assets and liabilities has taken place. Income also dropped to Rs 67,170 crore, a drop of 3.8% in comparison to the earlier year.
This is being blamed on the increase in non-interest incomes of these branches, especially other non-fee incomes. Sources of these incomes include deposit and transaction fees, insufficient funds (NSF) fees, annual fees, monthly account service charges, inactivity fees, check and deposit slip fees, and so on.
The survey reveals also reveals that overseas branches of Indian banks have generated a higher income than last year. These overseas branches perform services such as credit related services, trade finance related services and derivative, stocks, securities, forex trading services. There has been a mere marginal increase in their branches from 189 to 192 and in their subsidiaries from 310 to 325. Total number of employees in branches decreased marginally to 3,984 from 4,040, whereas the subsidiaries saw good increase in employee strength to 4,704 in 2016-17, from 4,091.
All in all, it is being reported that the three categories of banks with cross-border presence (overseas branches of Indian banks, overseas subsidiaries of Indian banks and foreign banks in India) have had a rather low enthusiasm in year 2016-17.
