The Shrinking Global Footprint of India’s Public Banks

Indian public banks in retreat at home and abroad.

India’s 21 public-sector banks (PSBs) plan to shut down 70 overseas offices deemed unviable during the current financial year, as well as pare back the number of branches they maintain in cities with multiple locations. The PSBs, which are majority-owned by the government, aim to streamline their geographic profile while opening up much-needed space to upgrade their technology to compete with the nation’s private banks.

“The banking sector has become cutthroat competitive,” says Anupam Rastogi, senior professor at the School of Business Management, Narsee Monjee Institute of Management Studies, and a former consultant with the Asian Development Bank. “With state-of-the-art technology, State Bank of India can make its presence felt in the whole of the UK with just one branch in London. Public sector banks have no other alternative but to rationalize and shut down unnecessary overseas branches.”

As privately owned Indian banks have expanded, the public banks have shrunk, including overseas. In 2016-17, 41 PSB branches reported losses, leading to closure of 35 foreign operations. The State Bank of India reported nine loss-making overseas branches, the Bank of India (BOI) eight, and the Bank of Baroda (BOB) seven. The PSBs maintained a total of 165 overseas branches at the beginning of this year, according to data published by the Reserve Bank of India: the State Bank of India leads, with 52, followed by the BOB (50) and the BOI (29). PSBs have the most branches in the UK (32), Hong Kong (13), the United Arab Emirates (13), and Singapore (12).

Public banks have faced headwinds in recent years. Today they account for 70% of banking assets in India, down from 90% in 1991. They racked up losses of close to 1.7 trillion rupees ($23.4 billion) between December 2015 and June 2018. By weeding out unviable branches while switching to a more digital business model, public banks can maintain their status while offering lower-cost, quality services to customers.