The Finance Ministry wants public sector banks (PSBs) to join forces to spread their wings overseas.

The ministry has drawn up a list of 42 countries, especially from South America, Africa, those from the former Soviet bloc and South-East Asia, into which the 26 PSBs can foray.

North Block, as the ministry is commonly referred to, has promised all possible support to the banks, including capital support, in expanding their overseas presence.

Seven banks will lead/hand-hold the expansion drive of all PSBs in the identified countries. The banks are: State Bank of India (SBI), Bank of Baroda (BoB), Bank of India (BoI), Indian Overseas Bank (IOB), Punjab National Bank (PNB), Union Bank of India and Central Bank of India.

“The underlying message from the ministry is that banks should have a unified approach to overseas expansion. So, banks should collaborate as well as compete,” said a senior public sector bank official.

Steep barriers to entry in the form of higher capital required for setting up overseas operations may be prompting the ministry to nudge the state-owned banks towards collaboration.

Most of the countries identified for PSBs’ overseas foray are either developing countries or emerging market economies. These countries are rich in mineral resources, oil and agriculture produces.

South America, Africa

SBI has been given the responsibility for making inroads into 11 countries in South America, including Brazil, Mexico, Argentina, Peru and Chile.

In mineral and oil rich Africa, the ministry has suggested that SBI and BoI may consider buying a bank in Ethiopia. Further, SBI and BoB should explore the possibility of having a branch in all key towns of South Africa.

Besides South Africa and Ethiopia, PSBs will be looking to open branches in seven other countries in Africa — Mozambique, Ghana, Angola, Nigeria, Mali, Niger and Senegal.

Former Soviet bloc countries

PNB, which has a presence in Kazakhstan (Central Asia), will examine the possibility of entering four former Soviet bloc countries — Uzbekistan, Tajikistan, Turkmenistan, and Kyrgyzstan.

SBI and BoB will lead the foray into Belarus, Ukraine and Azerbaijan (all former Soviet bloc countries).

South-East Asia

When it comes to South-East Asia, the banks which have been assigned the responsibility for overseas expansion are: IOB (Thailand and South Korea); IOB and BoI (Vietnam); SBI and BoI (Indonesia and the Philippines); Cambodia (BoI); and SBI, BoI and Union Bank (Myanmar).

According to Reserve Bank of India data, in 2010-11, foreign operations of Indian banks (16 public sector banks and six private sector banks) expanded to 244 offices/ branches as compared with 233 in the previous year.

The largest Indian bank, State Bank of India, had the largest network of foreign offices as at end August 2011 followed by Bank of Baroda. These two banks together accounted for 51 per cent of the total foreign offices of Indian banks as at end August 2011.

>kram@thehindu.co.in

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