The Central government will consolidate 35 overseas branches of State-run lenders, with 69 more under review, the financial services secretary Rajeev Kumar said in a tweet on Thursday.
Even as the PSU banks struggle with languishing financial situation and a fall out of the Rs 13,000-crore PNB-Nirav Modi scam, the government has ordered shutting down 35 overseas branches of Indian public sector banks (PSBs) over viability and profitability.
The government is looking to consolidated PSBs’ overseas operations in the same geography, the reports said further. The government is planning to close all the non-viable operations overseas for cost efficiency and synergy, the reports added. A committee headed by 4-5 bankers had recommended closing the international branches which are low on profitability.
In the wake of public sector banks feeling the pressure due to mounting non performing assets (NPAs), the government last year announced a Rs 2.11 trillion recapitalisation programme to help them clean their loan books. Recently, RBI also came up with a revised framework to fastrack recognition and resolution of bad loans.
The programme included infusion of Rs 1.35 trillion via recapitalisation bonds, and remaining Rs 760 billion in form of budgetary support. Many of the leading bankers including Deepak Parekh and Arundhati Bhattacharya have hailed the government’s serious efforts surrounding tackling of India’s massive bad loan problem.
In a recent interaction with FE Online, Ambit Capital CEO Saurabh Mukherjea said that the new framework will help accelerate the transition from the stressed standard loans to non-performing assets during coming six months. He further said that in the long-run, the Indian economy will hugely benefit from abolition of regulatory forbearance and enforcement of time-bound and co-ordinated resolution.
While the banks had set hopeful eyes on the impending capital infusion, on 14 February, Punjab National Bank (PNB) informed the stock exchanges about a Rs 11,400 crore scam at the Brady House branch in Mumbai, bringing the entire PSU banking system in the country to a shock. The bank alleged that billionaire diamond merchant Nirav Modi along with his associates generated fake Letters of Undertaking (LoU) colluding with a few of its bank employees.
The fraud amount has since then inflated to Rs 13,000 crore. The government agencies are now investigating the entire matter with Enforecement Directorate (ED) and Central Bureau of Investigation (CBI) conducting various raids in the last few days.